RSUs and ESPP shares are both company stock, but the tax rules could hardly be more different: one is taxed as salary the day it vests, the other not at all until you sell. Here is how each works, worked through for one employee who has both.
| Restricted stock units (RSUs) | Qualified ESPP (IRC 423) | |
|---|---|---|
| When income is taxed | At vest, on the full share value | At sale only; nothing at purchase |
| Withholding | Yes: 22% federal on supplemental wages (37% above $1 million), plus Social Security, Medicare and state | None on the sale, even when part is ordinary income on your W-2 |
| Social Security and Medicare | Yes, as wages (Social Security only up to the $184,500 wage base in 2026) | No (IRC 3121(a)(22)) |
| Ordinary income | Shares × price at vest | Disqualifying sale: purchase-date value minus price paid. Qualifying sale: smaller of the actual gain or the discount at the offering date |
| Cost basis | Price at vest | Price paid plus the ordinary income reported |
| Forms | W-2 for the vest; 1099-B when you sell | Form 3922 for the purchase; W-2 and 1099-B for the sale |
A single filer earns a $180,000 salary in 2026. In the same year 500 RSUs vest at $150, and the ESPP buys shares with $12,500 of payroll deductions at a 15% discount with a lookback (offering-date price $40, purchase-date price $50). The ESPP shares are sold at $55 a few months later.
$75,000 is added to wages. The employer withholds 22% of it. But the vest lifts taxable income from the 24% bracket into the 32% bracket, and the federal tax on it is actually $20,970 (2026 brackets, Rev. Proc. 2025-32), $4,470 more than the 22% withheld. The RSU tax calculator shows the same gap and how many shares are sold to cover withholding.
The purchase price is 85% of the lower price, $34, so $12,500 buys 367 shares. Selling within a year is a disqualifying disposition: ($50 − $34) × 367 = $5,872 is ordinary income added to the W-2, and ($55 − $50) × 367 = $1,835 is a short-term capital gain. No tax is withheld on either. On top of the salary and the RSU income, they add about $1,879 and $587 of federal tax. The ESPP calculator compares this with a qualifying sale.
RSU under-withholding ($4,470) plus the unwithheld ESPP tax comes to about $6,936 of federal tax not covered by withholding, before state tax. The IRS generally charges an underpayment penalty unless withholding and estimated payments reach 90% of this year’s tax or 100% of last year’s, whichever is smaller (higher-income taxpayers face a higher prior-year threshold; see Form 1040-ES). A quarterly estimated payment after each vest or sale, or extra withholding on the W-4, handles it.
A sale is qualifying if it comes more than two years after the offering date and more than one year after the purchase. In the example, a qualifying sale at the same $55 would make only $2,202 ordinary income (15% of the $40 offering-date price × 367 shares) and the rest long-term gain. That saves tax only if the price holds for a year or more: if the stock falls below the purchase price, a qualifying seller has no ordinary income but a capital loss, while an early seller still reports the full discount as income and gets a capital loss to offset it.
Brokers often report RSU shares with a $0 basis and ESPP shares with only the price you paid, because the ordinary income was reported on your W-2 instead. If you copy those numbers onto Form 8949 unchanged, you pay tax on the same income twice. Use the vest-date price for RSUs and the price paid plus the ordinary income for ESPP shares; your vesting confirmations and Form 3922 have the figures. IRS Publication 525 shows the ESPP calculation with a worked example.
Holding RSU shares after vest is the same decision as buying your employer’s stock with a cash bonus, since the tax is due either way. Selling right after vest usually creates little or no extra gain. ESPP shares sold right away lock in the discount; holding for a qualifying sale trades a lower tax rate for a year or more of single-stock risk, on top of a paycheck that already depends on the same company.
No, but they can look that way. The vest is taxed as wages; when you sell, only the change from the vest price is a capital gain. Use the vest price as your cost basis, not the $0 some brokers report.
Employers do not withhold on ESPP dispositions, even when part of the gain is ordinary income on your W-2. Plan an estimated payment or extra withholding.
RSU vests are wages subject to Social Security (up to the $184,500 base in 2026) and Medicare. Income from a qualified ESPP is excluded from both. For 2027 the Social Security wage base rises to $192,300 (Social Security Administration, announced October 14, 2026).
It lowers the ordinary-income part if the price holds, but you carry the risk of one stock for at least a year after purchase and two years after the offering date.
Make an estimated payment in the quarter of the vest or raise withholding on Form W-4 so that total payments meet the safe-harbor threshold described in IRS Topic 306 and Form 1040-ES.
The form your employer issues for ESPP purchases, listing the offering and purchase dates, prices and shares. Keep it to work out your ordinary income and basis when you sell.