Question 1

How are RSUs taxed in the US?

Accepted Answer

RSUs are taxed as ordinary income at vest, valued at the fair market value (FMV) on the vesting date. Your employer withholds federal supplemental tax (22% under $1M YTD bonuses, 37% above), state supplemental tax (varies by state), and full FICA (Social Security up to the wage base + Medicare). The vest amount appears on your W-2 as wages in box 1 and box 16. If you hold and later sell, any subsequent gain or loss vs. the vest-day FMV is treated as capital gain — short-term (ordinary rate) if held under 1 year, long-term (15-20% + 3.8% NIIT) if over 1 year.

Question 2

What is the federal tax rate on RSUs?

Accepted Answer

The IRS supplemental withholding rate is 22% on the first $1,000,000 of supplemental wages (RSUs + bonuses + commissions) per calendar year, and 37% on amounts above $1M (IRS Publication 15, Section 7). This is the WITHHOLDING rate — your actual marginal rate at filing may be higher (24%, 32%, 35%, or 37%) depending on total taxable income. High earners typically owe an additional 10-15% at filing time. Plan for this by saving extra cash from every vest.

Question 3

How does California tax RSUs?

Accepted Answer

California uses a 10.23% supplemental withholding rate for stock-related supplemental wages (FTB Pub 1017) — separate from the 6.6% rate on bonuses/non-stock supplementals. At filing, California taxes RSU income at marginal rates up to 13.3% (the top US state rate) plus the 1.1% mental health tax surcharge over $1M. Even after moving out of California, RSUs granted while you were a California resident remain partly Cal-source income — California can tax the workdays-in-CA fraction over the vesting period. Get a tax professional involved before relocating.

Question 4

What is a sell-to-cover RSU?

Accepted Answer

Sell-to-cover is the default at most large employers: when RSUs vest, the broker (Fidelity, E*TRADE, Schwab Stock Plan) immediately sells enough shares to cover federal + state + FICA tax withholding, and deposits the remaining shares in your brokerage account. For a 1,000-share vest at $200 with ~35% combined withholding, ~350 shares are sold (proceeds ~$70,000 sent to IRS/state) and ~650 shares are deposited in your account. The sell-to-cover transaction generates a 1099-B with a tiny gain/loss vs. vest-day FMV.

Question 5

How do I calculate RSU value before they vest?

Accepted Answer

Multiply the number of unvested shares scheduled to vest on a future date by your assumed stock price for that date. For example, 100 shares vesting next quarter at an assumed $250 stock price = $25,000 gross value, roughly $16,000-$18,000 after tax depending on your bracket and state. Note that the actual stock price on vest date determines real value — large public companies move 10-30% over a quarter, so model best/base/worst cases. Pre-IPO startup RSUs use 409A valuation, not market price; until liquidity event the 'value' is theoretical.

Question 6

When should I sell my RSUs?

Accepted Answer

The default-rational answer for most tech employees is: sell at vest. You already paid ordinary income tax on the FMV; holding more concentrates risk (you already get a paycheck from this company). Common reasons to hold: (1) you believe the stock will outperform your alternative investment after-tax, (2) you're close to a 1-year holding milestone to convert gain from short-term to long-term capital gains, (3) you're subject to a blackout window. Hold-then-sell strategies should fit into a written investment policy — emotional 'I love my company' holds destroy more wealth than they create.

Question 7

RSU vs stock options — what's the difference?

Accepted Answer

RSUs are PROMISES of shares delivered after vesting, with full value taxed as ordinary income at vest. Stock options (ISOs or NSOs) give you the RIGHT to BUY shares at a fixed strike price within a window. Options can be worthless if the stock drops below strike; RSUs always have value as long as the stock price > $0. Options offer more leverage and potentially better tax treatment (ISO long-term capital gains on the whole spread), but require capital to exercise and carry expiration risk. Most public-company tech employers stopped issuing new options to rank-and-file in the early 2010s — RSUs are now standard.

Question 8

How does the 1-year cliff and vesting schedule work?

Accepted Answer

Standard tech industry vesting: 4-year total, 1-year cliff, monthly vesting after. On grant date you get 0 shares vested. On the 1-year anniversary, 25% of the grant vests in one block (the 'cliff'). Then 1/48th of the grant vests each month for the remaining 36 months. Other variants: quarterly vesting (Amazon's old 5/15/40/40 backloaded schedule was replaced with frontloaded vesting after 2023 changes), refresher grants overlapping with original grant, and accelerated vesting on acquisition or termination. Your offer letter and equity agreement are the authoritative source.

Question 9

What is the Additional Medicare Tax on RSUs?

Accepted Answer

The Additional Medicare Tax (Affordable Care Act) is 0.9% on wages above $200,000 for single filers ($250,000 for MFJ, $125,000 for MFS), with NO employer match. Your employer must withhold the 0.9% once you cross $200K of YTD wages from that employer. Self-employed individuals pay it on schedule SE. Combined with the regular 1.45% Medicare and (for high earners) 3.8% Net Investment Income Tax on investment gains, total Medicare-related tax can reach 5.15% on RSU + capital gains income above the threshold.

Question 10

Are RSUs taxed differently at Amazon, Google, Meta, or Microsoft?

Accepted Answer

No — the federal supplemental rate (22%/37%) and FICA rules are the same regardless of employer. Differences come from: (1) State of residency (CA 10.23% vs WA 0%), (2) Vesting schedule (Amazon used to backload heavily; Google/Meta/Microsoft are flat quarterly), (3) Whether the broker handles sell-to-cover or net-share-settlement (NSS — Microsoft uses NSS, which avoids creating a 1099-B), (4) Refresher grant timing and size. Your gross RSU value × withholding rate = withheld; the rest goes through your normal tax return.

Question 11

How are RSUs taxed in the UK?

Accepted Answer

UK RSUs (typically called Restricted Stock Awards in HMRC docs) vest as employment income taxed via PAYE. Marginal income tax 2025-26: 20% basic (£12,570-£50,270), 40% higher (£50,270-£125,140), 45% additional (>£125,140). Class 1 National Insurance: 8% employee NI on £12,570-£50,270, 2% above. London tech worker at £150K base hitting RSUs typically pays 45% + 2% NI = 47% marginal. Some UK employees use Tax-Advantaged Share Schemes (CSOPs, SAYE) for better treatment, but standard US-company RSUs do NOT qualify. Capital gains tax (CGT) applies to post-vest sales: 20% (24% for higher-rate taxpayers) above the £3,000 annual exemption (2025-26).

Question 12

How are RSUs taxed in Canada?

Accepted Answer

CRA treats RSUs as employment income taxed at marginal federal + provincial rates. 2026 federal brackets (estimated): 15% to $57,375, 20.5% to $114,750, 26% to $177,882, 29% to $253,414, 33% above. Provincial adds 5-25% on top: Ontario top combined ~53.5%; BC ~53.5%; Alberta ~48%; Quebec ~53.3%. Employer withholds via T4 source deductions. CPP/EI capped (CPP 2026 max contributory $73,200, EI cap $66,400). Post-vest holding gains/losses are capital — 50% inclusion rate up to $250K of annual gains, 66.67% above (2024 budget change effective 2024-06-25). Always cross-check current CRA brackets before filing.

Question 13

How are RSUs taxed in Australia?

Accepted Answer

ATO treats RSUs under Division 83A (Employee Share Schemes). Default: taxed at vest as ordinary income at marginal rates. 2025-26 brackets: 0% to $18,200, 16% to $45,000, 30% to $135,000, 37% to $190,000, 45% above + 2% Medicare Levy. Senior tech roles typically sit in 37%-45% + 2% = 39%-47% marginal. ESS Start-up Concession allows tax deferral for small early-stage employers (TSR < $50M, unlisted). Capital Gains Tax on post-vest sales: 50% CGT discount if held > 12 months. Employer must report ESS via the annual ESS statement.

Question 14

What is the 'double trigger' RSU at pre-IPO startups?

Accepted Answer

Pre-IPO startup RSUs typically use double-trigger vesting: trigger 1 = time-based vesting (e.g. 4-year monthly after cliff); trigger 2 = liquidity event (IPO or acquisition within ~7 years of grant). No tax owed until both triggers fire. This avoids the disaster of owing income tax on shares you can't sell (which happened at Facebook pre-IPO). When the IPO happens, ALL previously time-vested shares vest at once and create a massive tax event — plan for a tax bill of 30-50% of vest value in the year of IPO, often before the lockup ends and you can actually sell shares.

Question 15

What is cost basis for RSUs?

Accepted Answer

Cost basis for an RSU lot = the fair market value (FMV) at vest, which is already taxed as ordinary income on your W-2. When you later sell that lot, only the gain ABOVE this basis is taxable as capital gain (or below it as capital loss). Common mistake: brokers sometimes report $0 cost basis on Form 1099-B for RSU sales (because the broker doesn't know your vest FMV). Manually adjust on Form 8949 to the correct vest-day FMV, or you'll pay tax twice — once on the W-2 and again as capital gain on the same amount. Schwab/Fidelity/E*TRADE Stock Plan accounts usually pre-fill this correctly; check it anyway.

Question 16

Should I exercise estimated tax payments for under-withholding?

Accepted Answer

Yes if you expect to owe more than $1,000 at filing (IRS safe harbor). Pay quarterly estimated taxes (Form 1040-ES) by Apr 15, Jun 15, Sep 15, Jan 15 of the following year. Safe harbor: 100% of prior year tax (110% if AGI > $150K) avoids underpayment penalty. Alternative for W-2 workers: increase paycheck withholding (Form W-4 'additional amount') in Q4 to backfill — IRS treats withholding as evenly paid through the year, so this can avoid the penalty even after Q3 has passed. RSU vests in Q4 often produce large under-withholding situations.

Question 17

Is this RSU calculator accurate for state taxes?

Accepted Answer

Yes for the supplemental wage rate, which is what your employer actually withholds. The calculator uses each state's official 2026 supplemental rate (CA 10.23%, NY 11.7%, NJ 5-10%, no tax in TX/FL/WA/TN/NV/SD/NH/AK/WY). However, at filing you may owe MORE (your marginal state rate > supplemental rate, e.g. CA marginal 13.3% > supplemental 10.23%). The calculator approximates filing-time liability by also showing your estimated marginal bracket. For multi-state situations (worked in CA + moved to TX mid-vest period) get a tax professional involved.

Question 18

How accurate is the 2026 tax data in this calculator?

Accepted Answer

Tax brackets, FICA wage bases, and state supplemental rates in this calculator are current for tax year 2026 (effective date shown above). The IRS publishes Social Security wage base in October for the following year (2026 base: $176,100 per SSA Press Release). Federal supplemental withholding stays at 22%/37% per current law through 2025 sunset; 2026 update reflects extended/modified TCJA provisions. State supplemental rates rarely change but California FTB, New York DTF, and others publish updated tables annually. Re-check the effective date badge — we refresh tax data each January (or sooner if Congress changes brackets mid-year).

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