RSU Tax & Withholding Gap Calculator (2026)

Employers use the IRS-mandated 22% federal supplemental rate on the first $1M of supplemental wages (37% above $1M) regardless of your true marginal bracket. If you are in the 32%, 35%, or 37% bracket, withholding is automatically 10-15 percentage points short. The gap shows up as a balance due when you file.

At vest, you owe ordinary income tax on the full FMV. Your cost basis becomes that FMV. If you sell within 12 months of vesting, any further gain is short-term and taxed at ordinary rates. If you hold more than 12 months from the vest date, gains are long-term (0%/15%/20% LTCG plus 3.8% NIIT for high earners). The holding period clock starts at vest, not grant.

If your total withholding will be less than the smaller of 90% of current-year tax or 110% of prior-year tax (for AGI over $150K), the IRS may charge an underpayment penalty. Many RSU-heavy employees increase W-4 withholding from salary or make Q3/Q4 estimated payments via Form 1040-ES to cover the supplemental gap.

Wash sale rules apply to losses, not vests. If you sell RSU shares at a loss and buy substantially identical shares within 30 days before or after the sale, the loss is disallowed and added to the basis of the replacement shares. New RSU vests within that window can trigger the rule, so coordinate vest timing with tax-loss harvesting.

No. RSUs are taxed as ordinary W-2 wages, with no preference item created. AMT is mostly a risk for ISO exercises and large itemized deductions, not RSUs. The post-TCJA AMT exemption is also high enough that very few RSU earners hit it.

Federal law requires 37% withholding on cumulative supplemental wages over $1M per employee per calendar year. The 22% rate applies to the first $1M; anything above is withheld at 37%. If you have a large multi-million-dollar vest or multiple vests adding up past $1M, the upper tranche is automatically withheld closer to the top marginal rate, partially closing the gap.

Sell-to-cover sells just enough shares to fund the tax withholding, leaving you with diversified outcome only on the retained shares. Holding all shares (and paying tax from cash) increases concentration risk in your employer stock. Most planners suggest selling enough at vest to cover the tax bill plus the gap — anything more is a separate concentration-management decision.

You still owe tax on the FMV at vest, even if the stock drops afterward. A vest at $100/share that falls to $40 still triggers ordinary income tax on the $100 amount. If you then sell at $40, you have a $60/share short-term capital loss (assuming sale within 12 months). This is the classic "tax on phantom income" problem RSU holders face during downturns.