2026 Withholding Rules for RSU Income
The 22% rate is a withholding shortcut, not your tax rate. The 2025 law P.L. 119-21 made the current individual rates permanent, so the 22% and 37% supplemental rates continue for 2026.
Worked Example: From Vest to Tax Bill
- Income at vest: 500 shares × $150 = $75,000, added to box 1 of your W-2.
- Withholding: 22% federal on the $75,000. Social Security applies only to the first $4,500, because your $180,000 salary already covers most of the $184,500 base: $4,500 × 6.2% = $279. Medicare: $75,000 × 1.45% = $1,087.50, plus 0.9% on the $55,000 of wages above $200,000 = $495, for $1,583. State at 5% = $3,750. Total $22,112.
- Shares withheld: $22,112 ÷ $150 = 147.4, rounded up to 148 shares; you keep 352 shares worth $52,800.
- Tax actually owed: 2026 federal tax on $255,000 of wages minus tax on $180,000 = $20,970, or 28.0% of the vest.
- Gap: $20,970 − $16,500 = $4,470 still owed for this vest, before any other income.
How the Gap Changes With Salary and Vest Size
At a $90,000 salary much of the vest is taxed at 22% and 24%, so the flat rate is close. At $400,000 the vest sits in the 35% bracket and the gap per dollar is largest. Above $1 million of supplemental pay the 37% rate catches up with the top bracket for the excess.
Mistakes People Make With RSU Taxes
- Double-counting the basis. Your cost basis in kept shares is the vest-date price, already taxed as wages. Brokerage 1099-B forms sometimes show $0 basis for RSU shares; use the vest price from your vesting confirmation so the $150 a share is not taxed again.
- Treating the 22% as final. If your bracket is 24% or higher, set aside the difference or make an estimated payment for the quarter of the vest.
- Thinking an 83(b) election applies. The 83(b) election in Pub. 525 covers restricted stock actually transferred to you; RSUs are a promise to deliver shares later, so there is nothing to elect on.
- Holding the shares to defer tax. The vest is taxed whether you keep or sell the shares. Keeping them is an investment decision, not a tax one; selling right after vest usually produces little or no extra gain.
- Forgetting state tax on moves. RSUs that vest after you change states may be taxed partly by the state where you earned them; check your W-2 allocation.
What the Calculator Does Not Cover
It estimates federal tax with the 2026 standard deduction and brackets on wages only. Itemized deductions, credits, other income, the net investment income tax, state brackets and local taxes are not included, and the 0.9% Additional Medicare Tax is shown as withheld, not reconciled for married couples. Private-company RSUs with a section 83(i) deferral election and RSUs in a foreign country follow other rules. For large vests, a CPA or enrolled agent can set estimated payments to avoid an underpayment penalty.
Frequently Asked Questions
How are RSUs taxed?
As ordinary wages on the vest date at the market value of the shares that vest; Social Security and Medicare apply too. Later price changes are capital gains or losses when you sell.
Why do I owe tax on my RSUs at tax time?
Employers withhold federal tax on supplemental wages at a flat 22%, but the vest is taxed at your bracket. In the 24% bracket or higher, withholding falls short.
Is the 22% supplemental withholding rate the same in 2026?
Yes. IRS Publication 15 for 2026 keeps 22%, and 37% on supplemental pay over $1 million, because P.L. 119-21 made the individual rates permanent.
What is my cost basis for RSU shares?
The share price on the vest date. Use it when you sell so the income already taxed as wages is not taxed again.
Should I sell RSUs as soon as they vest?
Selling immediately adds little extra tax because the basis is the vest price. Whether to keep them is a question of how much of your wealth you want in one stock.
Do RSUs count toward the Social Security wage base?
Yes, they are wages. Once your wages for the year reach $184,500 in 2026, no more Social Security tax is withheld; Medicare continues.
Can I file an 83(b) election on RSUs?
No. An 83(b) election applies to restricted stock transferred to you at grant; RSUs are not transferred until they vest.
How to Use This Calculator
- Enter shares and vest price — from your vesting confirmation (the fair market value used for withholding).
- Enter your other wages and filing status — your expected salary and bonus for the year, to place the vest in your bracket.
- Add the state rate and earlier supplemental pay — the rate your employer withholds on bonuses and any supplemental pay already received this year (it moves the $1 million threshold).
- Read the results — shares withheld and kept, each tax withheld, federal tax actually owed, the gap at tax time and your cost basis.
📚 Sources & References- [1] IRS. Publication 15 (2026), Employer’s Tax Guide: supplemental wage withholding, Social Security wage base $184,500 (accessed Oct 2026). www.irs.gov
- [2] IRS. Publication 525 for 2025 returns, Taxable and Nontaxable Income: restricted property (accessed Oct 2026). www.irs.gov
- [3] IRS. Revenue Procedure 2025-32 (2026 tax brackets and standard deduction). www.irs.gov
- [4] Social Security Administration. 2026 COLA fact sheet (wage base $184,500). www.ssa.gov
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