A Restricted Stock Unit (RSU) is a promise from your employer to hand you company shares once you stay employed long enough for them to vest. Unlike stock options, you do not pay to acquire the shares — but that does not make them free. On every vest date, the full market value of the shares that vest is treated as ordinary wage income, exactly like a bonus, and federal, state, Social Security and Medicare taxes are withheld before the shares even hit your account.
This RSU calculator estimates your real, after-tax take-home when your restricted stock units vest. Enter your grant size, the share price, and your tax rates, and the result card shows the gross value, the estimated tax bill, the net dollars you actually keep, and a year-by-year vesting schedule so you can plan your cash flow around each cliff.
How to Use
- Enter the RSU Shares Granted — the total number of units in your offer letter or equity agreement.
- Set the Stock Price at Vest. If you are valuing a future grant, use the current fair market value; if you already hold vested shares, use the price on your most recent vest date.
- Type your Federal Tax Rate. Most employers use the flat supplemental-wage withholding of 22% on vesting income up to $1,000,000 and 37% on amounts above that. If you know your true marginal bracket, enter that instead — withholding is not always the same as your final tax.
- Add your State Tax Rate. Type 0 if you live in a no-income-tax state such as Texas, Florida, Washington, or Nevada.
- Choose your Vesting Period (most grants are 4 years) and your Cliff Period (most are 1 year). The first tranche vests all at once at the cliff; the remainder vests evenly across the remaining years.
The result card breaks the grant into gross value, estimated tax withheld, and after-tax net take-home, then lists the net value you can expect at each annual vest.
How RSU Tax Works (And Why It Is Not Stock Options)
It is critical to understand that RSUs are equity grants, not options. A stock option gives you the right to buy shares later at a fixed strike price, and you usually owe nothing in tax until you exercise and (often) sell. An RSU, by contrast, converts into actual shares on the vest date, and the IRS taxes that conversion as compensation income the moment it vests.
The mechanics are simple:
- On the vest date, the company takes the number of shares vesting and multiplies by the fair market value.
- That product is added to your W-2 wages for the year.
- Your employer withholds federal supplemental tax, state income tax, and FICA (Social Security and Medicare) — often by selling a portion of the newly vested shares back to the company, called "sell-to-cover."
- Only the remaining shares are actually yours to keep.
The core formula behind this calculator is:
After-tax net value = shares × stock price × (1 − federal rate − state rate)
Worked example: 1,000 shares vesting at $150 each with a 22% federal rate and a 5% state rate. The gross value is $150,000. Combined withholding is 27%, or $40,500. Your net take-home is $109,500 — not the headline $150,000 your equity statement advertises.
Two things to watch after vesting. First, the price you were taxed on becomes your cost basis; if you later sell the shares for more, you only owe capital gains on the increase. Second, because vesting spikes your W-2 income, it can push part of your salary into a higher marginal bracket, which is why adjusting the federal rate upward — rather than leaving it at the default 22% — gives a more honest estimate.
Examples
Example 1 — Standard 4-year tech grant. An engineer receives 4,000 RSUs with a 1-year cliff, vesting over 4 years. The stock trades at $150 on each vest date, federal withholding is 22% and state tax is 5%. At the 1-year cliff, 25% (1,000 shares) vests: gross $150,000, tax roughly $40,500, net $109,500. The same net lands in the account in years 2, 3, and 4, for a four-year after-tap total near $438,000.
Example 2 — No-income-tax state. A remote worker in Texas has the same 1,000-share vest at $150 with 22% federal and 0% state. Withholding drops to 22%, so the net take-home rises from $109,500 to $117,000 — an extra $7,500 kept at a single vest simply because of where they live.
Example 3 — A seven-figure vest. When a founder-level grant of 1,000,000 shares vests at $100, the gross is $100,000,000. Above the $1,000,000 supplemental threshold, federal withholding jumps to 37%; combined with a 6% state rate, net take-home is roughly $57,000,000 — a life-changing number, but nearly 43% of the headline value goes to taxes.
FAQ
What is the difference between an RSU and a stock option?
An RSU is an outright grant of shares that you receive for free once vested; the fair market value on the vest date is taxed as ordinary wage income. A stock option gives you the right to buy shares later at a fixed strike price, and you generally owe no tax until you exercise it. RSUs have value as long as the stock price is above zero, while options can expire worthless if the price stays below the strike.
Are RSUs taxed when they vest or when I sell them?
They are taxed at vesting. The market value of the shares that vest is added to your W-2 as ordinary compensation income, and your employer withholds tax immediately. You only owe additional tax later — at long-term or short-term capital gains rates — if you sell the shares for more than the price you were already taxed on.
What is the 22% supplemental withholding rate?
The IRS requires employers to withhold federal income tax on supplemental wages (bonuses, commissions, and RSU vesting) at a flat 22% for amounts up to $1,000,000 in a calendar year, and 37% on amounts above that $1,000,000 threshold. This is withholding, not your final tax bill; if your marginal bracket is higher, you may owe more at filing time.
How much tax is withheld on my RSU vest?
Employers typically withhold federal supplemental tax (22% or 37%), your state income tax, and the 7.65% FICA (Social Security and Medicare) up to the Social Security wage base. Because withholding is often done by selling a portion of the vested shares ("sell-to-cover"), the number of shares deposited into your account is smaller than the number that vested. This calculator models the federal and state pieces; add FICA yourself if it materially changes the result.
Should I sell my RSUs immediately after they vest?
There is no universal rule, but selling immediately locks in the after-tax value and removes concentration risk in a single stock — especially if that stock is your employer's. Holding longer hoping for growth means betting your wealth on one company while already receiving salary from it. Many advisors recommend diversifying vested RSUs into a broad portfolio rather than keeping the shares.
Does RSU vesting affect my tax bracket?
Yes. Because vested RSUs count as ordinary wage income, a large vest can push part of your total income into a higher marginal bracket. If you expect a big vest in December, consider adjusting your withholding or estimated tax payments so you do not face an unexpected underpayment penalty in April.
Disclaimer
This RSU calculator is provided for informational purposes only and does not constitute financial, tax, or legal advice. Withholding rates are simplified estimates and do not include FICA, additional Medicare tax, net investment income tax, or your actual marginal bracket; real tax depends on your full income, deductions, filing status, and the rules of your state. Always confirm your final RSU tax position with a qualified tax professional before making vesting or sale decisions.