Equity compensation · Section 83
You owe RSU taxes when your shares vest and are delivered, because their value counts as wages.
Restricted stock units (RSUs) are taxed when the company delivers the shares, which is usually when they vest. Their fair market value that day is taxed at income tax rates of 10% to 37% for 2026. When you sell, only the change in price since delivery is taxed.
Updated · Sources
Federal RSU tax rates for 2026
- 37%
- is the top income tax rate on the shares’ value when you receive them.
- 22%
- is the flat rate your employer can withhold for income tax, whatever your bracket.
- 20%
- is the top long-term gain rate, before the 3.8% NIIT, on shares sold more than a year after delivery.
Supplemental wages from one employer above $1 million in a year, such as RSU income and bonuses, are withheld at 37%.
How are RSUs taxed at vest and at sale?
Tax on RSU stock comes at three points after the grant: vesting, delivery and sale. The same federal RSU tax rules apply at a private startup and at Amazon. Some private companies add a double trigger or allow an 83(i) election.
No tax at grant
For the IRS, an RSU is only a promise to pay you shares, or sometimes cash, in the future. So an RSU grant is not income, and you cannot make an 83(b) election on it.
Payroll tax at vesting
Social Security and Medicare tax are usually due when the units vest, even if the shares arrive in a later year. Social Security is 6.2% of 2026 wages up to $184,500, and Medicare is 1.45% of all wages. Medicare adds 0.9% on wages over $200,000, or $250,000 on a joint return.
Income tax at delivery
Section 83 of the tax code taxes the shares as wages on the day you receive them, at their value then. Your Form W-2 puts that value in the same tax category as your salary, even though no cash reached your paycheck. If your plan delivers the shares after they vest, this tax waits until delivery.
Tax on the gain when you sell
Your cost basis is the value you were taxed on, so the vest is not taxed again. A gain within a year of delivery is short-term, taxed at income tax rates. A gain after more than a year is long-term, taxed at 0%, 15% or 20%. Above $200,000 of modified AGI, or $250,000 joint, you may also owe the 3.8% net investment income tax on it.
An RSU tax example: why the vest is taxed so high.
The vest is taxed at your top rates, because it lands on top of your salary. To calculate RSU tax, apply each bracket the vest reaches, then add Social Security and Medicare where they apply.
Tax on the vest
$37,163
That is $34,813 of income tax plus $2,350 of Medicare tax, or 37.2% of the vest.
Withheld at vest
$24,350
This assumes your employer uses the optional flat 22% for income tax, and withholds all of the Medicare tax.
Due when you file
$12,813
This is the income tax that the flat 22% did not cover.
These are 2026 federal figures. The vest adds $100,000 to your taxable income. The first $6,225 is taxed at 32%, because that bracket ends at $256,225, and the other $93,775 at 35%. Your wages from this employer already top $200,000 and the $184,500 Social Security limit. So Medicare is 1.45% plus the 0.9% Additional Medicare Tax, and no Social Security tax is due. Shares sold or kept to pay the tax still count as part of the $100,000. State tax is separate.
How does RSU tax treatment differ from a restricted stock award?
A restricted stock award gives you the shares at grant, subject to vesting. Unlike a stock option, an RSU has nothing to exercise and usually nothing to pay.
| RSU | Restricted stock | |
|---|---|---|
| At grant | A promise of shares | The shares themselves You can forfeit them until they vest |
| Taxed on | Value at delivery | Value at vesting Minus anything you paid |
| Tax at grant | Never No 83(b) election is allowed | With an 83(b) election Filed within 30 days of the grant |
| Holding period starts | At delivery | At vesting Or at grant, with an 83(b) election |
| If forfeited | Nothing was taxed | No deduction for tax paid With an 83(b) election; without one, nothing was taxed |
For employees, both are taxed as wages, with Social Security and Medicare tax.
RSU tax implications that are easy to miss.
Your 1099-B shows too little basis
For RSUs granted after 2013, the broker’s Form 1099-B leaves the vest’s value out of your basis. On your tax return, add it back on Form 8949 with code B, or the vest is taxed twice. If you file with software such as FreeTaxUSA, enter the corrected basis the same way.
A shortfall at filing can bring a penalty
Tax withheld at vest is a credit against what you owe, and any excess comes back as a refund. If withholding leaves $1,000 or more unpaid, a penalty can apply. You avoid it if timely payments cover 90% of this year’s tax, or 100% of last year’s (110% if last year’s AGI was over $150,000).
The tax stays if the price falls
The income from the vest is fixed at the shares’ value on delivery, even if the price later drops. Selling below that value gives you a capital loss. Each year it offsets capital gains plus up to $3,000 of other income ($1,500 if married filing separately), and the rest carries forward.
Moving away may not end state tax
California may tax RSUs that vest after you move to Texas, on the part earned while you worked there. FTB Publication 1004 taxes the share of the income earned by work in California between grant and vesting. If you still live in California when a unit vests, all of it is taxed there.
Years of units can be taxed in one year
Double-trigger RSUs vest only after a time condition and a liquidity event, such as an IPO or acquisition. Units that met the time condition over several years can then all be taxed in one year. An IPO lockup does not delay that tax, even though you cannot sell the shares yet.
RSU tax planning before your next vest.
Valim’s CPAs help tech employees with RSUs plan for each vest and sale, and file the returns that report them.
- We project the tax on your coming vests. We also set the estimated payments or extra withholding that cover the gap.
- We plan the timing of sales around the one-year mark and any liquidity event, such as an IPO.
- We report each sale with the basis corrected on Form 8949, so your vest is not taxed twice.
- We split RSU income between states after a move, and handle the US tax on foreign RSU income that another country taxed too.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
RSU tax questions.
Do RSUs get taxed twice?
No, RSUs are not taxed twice on the same dollars. The shares’ value when you receive them is taxed as wages, and that amount becomes your cost basis. When you sell, only the change in price since then is taxed. The usual double tax is a reporting error: for RSUs granted after 2013, the broker’s Form 1099-B leaves that amount out of your basis. Correct it on Form 8949 with code B.
How much do you get taxed on RSUs?
RSUs are taxed like a cash bonus: at your own income tax rate, plus Social Security and Medicare. For 2026 the federal income tax rate is 10% to 37%, on the shares’ value when you receive them. Social Security takes 6.2% of wages up to $184,500, and Medicare takes 1.45%, plus 0.9% on wages over $200,000 ($250,000 joint). RSU income counts as supplemental wages, so your employer may withhold only a flat 22% for income tax, or 37% above $1 million. State income tax, where it applies, is on top.
Are RSUs taxed at 40%?
No tax law sets a 40% rate on RSUs, though the real rate can pass it. The top federal rates add up to 39.35%: 37% income tax, 1.45% Medicare tax and the 0.9% Additional Medicare Tax. The 37% rate starts above $640,600 of taxable income for a single filer, or $768,700 joint, in 2026. In the 24% bracket, with wages under the Social Security limit, the rate is 31.65%. State tax can push the top rate past 40%, and so can a SALT deduction that shrinks above $505,000 of income.
Should I sell RSUs as soon as they vest?
Selling RSUs as soon as they vest adds no tax, because the vest is taxed the same if you sell or hold. A sale right away shows almost no gain or loss, because your basis is the shares’ fair market value at delivery. If you hold, a gain within a year of delivery is short-term, taxed at your income tax rate. After more than a year, it is long-term, taxed at 0%, 15% or 20%.
Is there a way to avoid taxes on RSUs?
Usually not, because the shares’ value is wages, though income earned while working abroad can sometimes be excluded. Some private companies allow a Section 83(i) election, which delays the income tax, though not payroll tax, for up to five years. Holding the shares more than a year gets long-term rates on any later growth. Giving shares held that long to charity avoids tax on the growth, and can bring a deduction for their full value, within limits. At a qualifying startup, the growth may also be excluded as QSBS.
What are the disadvantages of RSUs?
RSUs are taxed on their full value when you receive the shares, even if you keep them. If the price then falls, that tax stays, and the drop is only a capital loss. Withholding at a flat 22% often falls short, so you can owe more at filing. RSUs also cannot use an 83(b) election, which lets restricted stock be taxed at grant instead.
Sources
- 26 U.S.C. § 83, Property transferred in connection with performance of services
- 26 C.F.R. § 1.83-3, Meaning and use of certain terms
- 26 C.F.R. § 1.83-4, Special rules
- 26 U.S.C. § 3101, Rate of tax (Social Security and Medicare)
- 26 U.S.C. § 3102, Deduction of tax from wages
- 26 U.S.C. § 3121, Definitions (Social Security and Medicare wages)
- 26 C.F.R. § 31.3402(g)-1, Supplemental wage payments
- IRS, Publication 15 (2026), Employer’s Tax Guide
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- 26 C.F.R. § 1.6045-1, Returns of information of brokers and barter exchanges
- IRS, Instructions for Form 1099-B
- IRS, Instructions for Form 8949
- 26 U.S.C. § 1222, Other terms relating to capital gains and losses
- 26 U.S.C. § 1211, Limitation on capital losses
- 26 U.S.C. § 1411, Net investment income tax
- 26 U.S.C. § 164, Taxes (the SALT deduction limit)
- 26 U.S.C. § 170, Charitable contributions
- 26 U.S.C. § 911, Citizens or residents of the United States living abroad
- 26 U.S.C. § 6654, Failure by individual to pay estimated income tax
- California FTB, Publication 1004 (revised 01/2015)
Reviewed and updated September 2026. General information, not advice for your situation.