RSU Taxes 2026: What You Actually Keep After the IRS

Last Updated: May 12, 2026

[!NOTE] The Quick Verdict:

• RSUs vest as ordinary income — taxed at your marginal rate + Social Security + Medicare
• Most employers withhold only 22% — if your marginal rate is higher, you owe the difference in April
• After vesting, gains/losses are capital gains — sell within a year = short-term (ordinary income rate); hold 12+ months = long-term (lower rate)
• Calculate your real take-home: Use the RSU Real Value Auditor to see your net after federal, state, and payroll taxes

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RSUs feel like free money when your company grants them. And at the grant date, they are worth exactly zero — you do not own anything until they vest. When vesting day arrives, the shares become yours. So does a substantial tax bill that many employees discover only after the fact.

Understanding RSU taxation before vesting is the difference between being ready for the bill and being blindsided by it.

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What RSUs Are (And When Taxes Hit)

A Restricted Stock Unit is a promise from your employer to give you company shares in the future, contingent on remaining employed (and sometimes on performance milestones). Most tech RSUs vest on a 4-year schedule with a 1-year cliff — 25% of the grant vests after year one, then monthly or quarterly after that.

Three dates matter for RSUs:

1. Grant date: When the company gives you the RSU award. No tax event. You own nothing yet — just the right to receive shares if you remain employed.

2. Vesting date: When the shares actually transfer to you. This is the tax event. The fair market value of the shares on this date is treated as ordinary income.

3. Sale date: When you sell the vested shares. The difference between the vesting price and the sale price is a capital gain or loss — taxed at capital gains rates, not ordinary income rates.

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The RSU Tax Calculation at Vesting

Example: 1,000 RSUs vest. Share price on vesting date: $50. You are in California with a total income around $200,000.

Tax	Rate	Amount
Federal income tax	32% marginal	$16,000
Social Security	6.2% (on $50k)	$3,100
Medicare	1.45%	$725
Additional Medicare (income >$200k)	0.9%	$450
California state income tax	~9.3%	$4,650
Total tax	~50%	~$24,925
After-tax value		~$25,075

Of a $50,000 RSU vesting event in California at $200,000+ total income, you keep approximately $25,000 — half the face value. In New York City or high-income brackets, effective rates can reach 55–60% combined.

[!IMPORTANT] Your employer typically withholds at a flat 22% federal rate at vesting (37% for supplemental wages above $1 million). If your actual marginal rate is 32% or 35%, you are under-withheld at vesting by 10–15 percentage points — and will owe that difference when you file your tax return. This is the most common RSU tax surprise.

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What Your Employer Withholds vs. What You Actually Owe

Your Total Income	Actual Marginal Rate	Typical Employer Withholding	Gap You Owe in April
$45,000–$95,375	22%	22%	$0 (approximately covered)
$95,375–$182,050	24%	22%	~2% of RSU value
$182,050–$231,250	32%	22%	~10% of RSU value
$231,250–$578,125	35%	22%	~13% of RSU value
$578,125+	37%	37%	Covered (large grant)

On a $100,000 RSU vesting event for someone in the 32% bracket: employer withholds $22,000, actual federal tax = $32,000. Additional state taxes. They owe $10,000+ at tax time from RSU alone — plus their regular income from their salary.

The fix: Every time RSUs vest, calculate your expected additional tax liability immediately. Transfer that amount to a separate savings account. Make a quarterly estimated tax payment if needed (if you expect to owe more than $1,000 in RSU-related taxes not covered by withholding).

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After Vesting: The Capital Gains Layer

Once RSUs vest, any subsequent price movement is a capital gain or loss — not ordinary income.

Scenario: 1,000 RSUs vest at $50/share (you pay ordinary income tax on $50,000). Six months later, you sell at $65/share.

• Vesting gain: $50/share × 1,000 shares = $50,000 → Taxed as ordinary income at vesting
• Post-vest gain: ($65 − $50) × 1,000 shares = $15,000 → Short-term capital gain (held under 12 months) → taxed as ordinary income

If you wait 12 months from vesting to sell at $65:

• Post-vest gain: $15,000 → Long-term capital gain → 15% or 20% rate (vs. 32–37% ordinary rate)

The long-term capital gains benefit:

Tax Status	Long-term Rate	For income over…
0%	$0–$94,050 (married)	—
15%	$94,051–$583,750 (married)	Most tech employees
20%	$583,750+ (married)	High earners

Waiting 12 months after vesting to sell converts short-term gains to long-term gains — a potential 17–22 percentage point tax rate reduction on the post-vesting appreciation. However, this comes with concentration risk during the holding period.

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Sell Immediately vs. Hold: The Decision Framework

The question of whether to hold RSU shares after vesting is primarily a risk concentration question, not a tax optimization question.

Arguments for selling immediately at vesting:

1. Concentration risk. Your employment income already depends on your company’s success. Adding a large stock position in the same company doubles the correlation between your human capital and financial capital. If the company declines, you may face layoffs and stock losses simultaneously.

2. Tax simplicity. Selling immediately triggers no additional capital gains events. The ordinary income tax at vesting is your only tax.

3. Diversification. Proceeds from selling RSUs can be invested in a diversified index fund portfolio — removing company-specific risk.

Arguments for holding some RSU shares after vesting:

1. Long-term capital gains benefit. If you hold 12+ months and the stock appreciates, you pay the lower LTCG rate on the gain.

2. Strong conviction about company performance. If you have insider knowledge (used legally) or strong conviction about the company’s trajectory, holding is a view on the stock.

3. Emotional alignment. Some employees want ownership in the company they are building. This is a legitimate personal preference.

The rational default for most people: Sell RSUs at or shortly after vesting. Diversify the proceeds. Treat RSUs as compensation in cash form, not as an investment in your employer.

[!TIP] Use the RSU Real Value Auditor to see your net after all taxes for your specific income level, state, and vesting schedule — and model the sell-immediately vs. hold-12-months tax difference on your actual numbers.

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RSU Tax Planning Strategies

1. Adjust W-4 withholding If RSUs cause consistent under-withholding, increase your W-4 withholding from your salary to cover the gap. This avoids large April balances and potential underpayment penalties.

2. Quarterly estimated payments If RSU income is unpredictable or large, make quarterly estimated payments (April 15, June 17, September 16, January 15 for 2026 year). This avoids the penalty for underpayment.

3. Maximize pre-tax retirement contributions RSU income is ordinary income. Every pre-tax 401k dollar you contribute reduces the income base that RSU income is added to. If RSU vesting pushes you into a higher bracket, maximizing 401k ($23,500 in 2026) reduces the marginal rate that applies to some of the RSU income.

4. Harvest capital losses to offset RSU gains If you hold any investments that have declined since purchase, selling them generates a capital loss that offsets capital gains from RSU sales — reducing your net taxable gain. A robo-advisor like Wealthfront does this automatically.

5. Manage vesting timing if possible In some situations, you may be able to defer a vesting date (check with your HR and tax advisor). If large RSU vestings are pushing you above a threshold (Medicare surcharge, Roth IRA income limit, 0% LTCG bracket), timing may matter.

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RSUs vs. Stock Options: Which Is Better?

Feature	RSUs	NSOs (Non-Qual Options)	ISOs (Incentive Options)
Value if stock flat	Yes (if price > $0)	Only if above strike price	Only if above strike price
Tax at vest/exercise	Ordinary income at vest	Ordinary income at exercise	No regular tax at exercise
Tax at sale	LTCG if held 12+ months	LTCG if held 12+ months	Complex ISO rules, AMT risk
AMT risk	None	None	Yes — significant at high values
Simplicity	High	Medium	Low
Best for	Most employees	Moderate upside expectations	High-growth startups (if understood)

For most employees at public tech companies, RSUs are simpler and less risky than options. Options require capital to exercise (you buy shares at the strike price) and can expire worthless. RSUs always have value as long as the company exists.

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State Tax on RSUs: The Painful Variations

RSU tax rates vary dramatically by state:

State	State Income Tax on RSUs
California	9.3–13.3%
New York	6.85–10.9%
Washington	0% (no state income tax)
Texas	0%
Florida	0%
Massachusetts	5% flat
Oregon	9.9%
Illinois	4.95% flat

California residents with large RSU packages face combined marginal rates of 50%+ in high income brackets. This is the primary driver behind tech employee relocations to Washington and Texas — not just salary, but the state tax on vesting RSU income.

Multi-state RSU taxation: If you worked in one state during the RSU grant period but live in a different state at vesting, some states claim the right to tax a portion of the RSU income. California is particularly aggressive about taxing RSU income attributable to time worked in California — even if you have since moved. If you move states with unvested RSUs, consult a CPA who specializes in multi-state RSU taxation.

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The Bottom Line

RSUs are a significant part of total compensation at most tech companies — but the face value of your grant is not what you keep. At income levels above $150,000 in California, New York, or similar high-tax states, you typically keep 40–55 cents of every dollar of RSU value.

This is not a reason to not appreciate RSUs. It is a reason to plan for them.

Know your withholding rate. Know your actual marginal rate. Set aside the difference immediately at vesting. Make quarterly estimated payments if the amounts are large. And decide consciously whether to hold or sell — based on risk concentration principles, not on hoping the stock goes up to justify a tax bill you already paid.

Run the RSU Real Value Auditor with your actual income, state, and vesting schedule to see your exact numbers.

When it’s time to file, TurboTax Premier handles RSU cost basis calculations and AMT exposure better than any other consumer tax software. See our full best tax software for 2026 — including exactly which tier you need for stock and RSU income.

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Financial Disclaimer: RSU taxation is complex and varies by state, employment situation, and individual tax circumstances. This content is a general educational overview and does not constitute tax or financial advice. Consult a CPA or tax advisor for guidance on your specific RSU situation, particularly for multi-state taxation, AMT, or large vesting events.