RSU Tax Calculator
RSUs vesting soon? Enter the number of shares and current price to see your tax hit and actual take-home value after withholding.
How RSU Taxation Works at Vesting
RSUs create phantom income. The moment they vest, the IRS treats the market value as wages. You haven't sold anything, you might not receive cash, but you owe taxes on the full value as if your employer paid you that amount in your paycheck. This surprises many employees who expect to pay taxes only when they sell.
Most companies handle the tax liability through sell-to-cover. When 200 RSUs vest at $100 per share, the gross value is $20,000. At a 40% combined tax rate, you owe $8,000. Your employer automatically sells 80 shares at $100 each to generate $8,000 for taxes, depositing the remaining 120 shares in your brokerage account. You had no choice in the matter—it's automatic.
This approach creates basis in your remaining shares. Those 120 shares you received have a $100-per-share cost basis for future capital gains purposes. If you later sell at $150, you only owe capital gains tax on the $50-per-share appreciation. The original $100 was already taxed as income, so the IRS doesn't double-tax it.
State Tax Variations and Planning
State taxes dramatically impact RSU proceeds. California's top rate hits 13.3%, Washington has zero state income tax, and most states fall somewhere between. If you're vesting $100,000 in RSUs, moving from California to Texas before vesting could save $13,300 in state taxes. Tech workers sometimes plan relocations around large vesting events for this reason.
Some states source RSU income to where the work was performed during the vesting period. California is notorious for this. If you worked in California for two years of a four-year vesting schedule, then moved to Nevada, California will still tax 50% of that vesting event at California rates. You can't fully escape by moving right before vesting if you earned the RSUs while working in the state.
Double-taxation issues arise when you move states during vesting. Your new state wants to tax the vesting income, your old state might also claim taxation rights. Most states offer credits for taxes paid to other states, but the rules are complex. Tax professionals specializing in multi-state equity compensation can save you thousands by properly sourcing the income and claiming appropriate credits.
Managing RSU Windfalls and Concentration Risk
Large RSU vesting events create both opportunity and risk. Receiving $50,000+ in employer stock is exciting until you realize your job, health insurance, and now a huge chunk of your net worth all depend on one company's success. Diversification isn't optional—it's financial survival.
A common strategy: sell immediately after vesting and rebalance into a diversified portfolio. You've already paid taxes on the full value, so selling quickly triggers minimal additional capital gains (maybe a few dollars per share if the stock moved since vesting). This locks in the compensation your employer granted while eliminating single-stock risk.
The counter-argument for holding is belief in the company's future and avoiding short-term capital gains. If you're convinced your employer's stock will outperform the S&P 500, holding might make sense. But be honest: would you take your annual bonus and invest it 100% in employer stock? If not, why do the same with RSUs? Most employees who hold large RSU positions are taking uncompensated risk that diversification would eliminate. Treat vested RSUs like cash compensation and invest them the same way you'd invest a cash bonus: diversified across many companies and asset classes.
Frequently Asked Questions
What are RSUs?
Restricted Stock Units are company stock grants that vest over time, typically 3-4 years. Unlike stock options, RSUs have value as long as the stock price is above zero. Once they vest, you own actual shares. The catch: vesting triggers immediate taxation on the full market value.
How are RSUs taxed at vesting?
RSUs are taxed as ordinary income at vesting. If 100 shares vest when the stock trades at $200, you owe income tax on $20,000 even if you don't sell. Employers typically withhold shares to cover taxes—you might receive only 60-70 shares after tax withholding, with the rest sold to pay your tax bill.
What is the typical tax rate on RSUs?
Your marginal tax rate applies. Federal rates range from 22-37% for most earners, plus state income tax (0-13% depending on state), plus FICA taxes (7.65%) on the first ~$160,000 of income. Total withholding often hits 40-50% in high-tax states, meaning you keep roughly half the gross value.
Should I sell RSUs immediately after vesting?
Most financial advisors recommend it to avoid concentration risk. Once RSUs vest and taxes are paid, they're just employer stock in your account. Holding creates the same risk as an ESPP: your income and investments are tied to one company. Sell and diversify into index funds unless you have strong conviction the stock will outperform.
Can I defer RSU taxation?
Not for most employees. RSUs trigger taxes at vesting, period. Some executives can negotiate deferred compensation arrangements, but these are complex, risky, and only available to top-level employees. For the vast majority of workers, RSU taxation at vesting is unavoidable.