"Why do I owe tax on RSUs in April if my employer already withheld?"

"Because RSU income is 'supplemental wages', most employers withhold a flat 22% federal rate on it (37% once supplemental wages exceed $1 million in a year). RSU income is taxed as ordinary income at your marginal rate, which is often 24%, 32%, 35% or 37% by the time vests are stacked on top of salary. The difference between the flat rate withheld and the marginal rate owed is the April shortfall."

"Is RSU withholding 22% or 37%?"

"The IRS optional flat rate on supplemental wages is 22%. Once an employee's supplemental wages exceed $1,000,000 in a calendar year, the excess must be withheld at 37% (IRS Publication 15, 2026)."

"Does sell-to-cover mean my RSU taxes are paid?"

"Sell-to-cover funds the withholding your employer is required to take — typically the 22% flat rate plus Social Security and Medicare — not the tax you ultimately owe. If your marginal rate is higher than 22%, sell-to-cover leaves the same gap as any other withholding method."

"What is the safe harbor for underpayment penalties?"

"Under the federal estimated-tax rules, an underpayment penalty is generally avoided when withholding plus timely estimated payments reach at least 90% of the current year's tax, or 100% of the prior year's tax (110% if prior-year adjusted gross income was over $150,000). Withholding counts as paid evenly through the year unless you show when it was actually withheld; estimated payments are due April 15, June 15, September 15 and January 15, and the penalty is computed like interest on each shortfall. There is no penalty when the balance due after withholding is under $1,000."

"Are RSUs taxed as ordinary income?"

"Yes. The fair market value of shares on the vest date is ordinary compensation income, reported on Form W-2 and subject to federal income tax, Social Security (up to the wage base, $184,500 for 2026) and Medicare, including the 0.9% Additional Medicare Tax above the applicable threshold. Any later gain or loss on the shares is a capital gain or loss measured from the vest-date value."

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RSU Tax Calculator: the April shortfall from 22% withholding

Most employers withhold a flat 22% on vested RSUs. Stacked on top of a salary, the same dollars are usually taxed at 24%, 32%, 35% or 37%. This estimates the federal shortfall, the payment that would generally reach the federal safe harbor, and the state gap — nothing is sent anywhere.

Filing status

Head of household and married filing separately: not yet — their brackets and thresholds differ.

Base salary, this year ($)

Regular wages before any RSU income. Include a cash bonus only if it is withheld like salary.

RSU income vesting this year ($)

Shares vesting × share price on each vest date, for every vest expected in the calendar year. This is what lands on your W-2.

Pre-tax deductions ($) (optional)

Traditional 401(k), HSA, pre-tax premiums. Reduces taxable wages.

State tax, itemizing, prior-year tax, supplemental wages over $1M (optional)

State supplemental withholding rate (%)

The flat rate your state applies to bonuses and stock compensation (California's stock-option and bonus rate is 10.23%). Leave 0 in a state with no income tax.

Your state marginal rate (%)

The state bracket your top dollars fall in. The state gap = (marginal − supplemental) × RSU income.

Itemized deductions ($)

Used only if higher than the 2026 standard deduction ($16,100 single / $32,200 joint).

Prior-year total federal tax ($) Prior-year AGI was over $150,000 (110% rule)

Supplemental wages already paid this year ($)

Only matters near the $1,000,000 supplemental-wage line, where the rate becomes 37%.

Want this for every grant and every year?

The RSU Tax Planner workbook lays out every vest through 2030 — the gap on each vest, the safe-harbor amount as four equal quarterly installments with due dates, a per-paycheck W-4 equivalent, shares sold to cover, and the $1M line — in Excel, $149 one-time.

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Why the April bill happens

When RSUs vest, the value of the shares is ordinary wage income. Your employer has to withhold on it, and because a vest is a "supplemental wage" rather than a regular paycheck, most payroll systems use the IRS optional flat rate: 22%. That rate is the same whether you earn $90,000 or $400,000.

Your actual tax on those dollars is not flat. Vests stack on top of salary, so they are taxed in your top brackets — for tax year 2026, 24% starts at $105,700 of taxable income for a single filer, 32% at $201,775, 35% at $256,225 and 37% at $640,600 (joint thresholds are double, except that the 37% bracket starts at $768,700). The gap between the flat rate withheld and the marginal rate owed becomes the balance due in April.

A worked example

Single filer, $180,000 salary, $120,000 of RSUs vesting in 2026, standard deduction, no other income. Taxable income is $283,900. The RSU slice is taxed partly at 24%, mostly at 32%, and the top $27,675 at 35% — $36,200 of federal tax on $120,000 of vests, an effective 30.2%. Payroll withheld 22%, or $26,400. The shortfall is about $9,800, before state tax.

Bracket	RSU dollars taxed there	Tax
24%	$37,875	$9,090
32%	$54,450	$17,424
35%	$27,675	$9,686
Total on the RSU slice	$120,000	$36,200
Withheld at 22%		$26,400
Shortfall		$9,800

Change the salary to $120,000 and the vests to $30,000 and the same mechanics produce a shortfall of about $564 — the gap scales with how far the vests reach into the higher brackets, not just with their size.

Sell-to-cover does not close the gap

Sell-to-cover (or net settlement) sells enough shares at vest to fund the withholding — the 22% federal flat rate, Social Security up to the wage base, Medicare, and any state supplemental rate. It is a way to pay the withholding without writing a check. It does not change how much withholding is taken, and it does not compute your marginal rate. If your marginal rate is above 22%, the shortfall is identical whether you sold shares to cover or paid the withholding in cash.

The $1 million line

Once an employee's supplemental wages for the calendar year exceed $1,000,000, the excess must be withheld at 37% rather than 22% (IRS Publication 15). For most people this never applies; for a large vest late in the year it can flip the direction of the gap.

Safe harbor: the rule that avoids the penalty

Owing a balance in April is not itself a penalty. The underpayment penalty applies when withholding plus timely estimated payments fall short of a safe harbor. The federal rule: total payments of at least 90% of the current year's tax, or 100% of last year's tax (110% if last year's adjusted gross income was over $150,000), generally avoid the penalty. Withholding is treated as paid evenly through the year unless you show when it was actually withheld; estimated payments are due April 15, June 15, September 15 and January 15, and the penalty is computed like interest on each installment that fell short, so a large vest in December costs less in penalty than the same vest in January. There is also no penalty at all when the balance due after withholding is under $1,000. The calculator shows the 90% test, and the prior-year alternative if you enter last year's total tax.

Two mechanisms exist for getting there. Estimated payments (Form 1040-ES) are made directly. Alternatively, Form W-4 Step 4(c) lets an employee add a fixed extra amount of federal withholding to each regular paycheck, which has the administrative advantage of counting as withholding rather than as an estimated payment. Which is appropriate depends on facts this tool does not see.

State tax

States with an income tax usually have their own flat supplemental rate, and the same mechanics apply. California withholds a flat 10.23% on stock-option and bonus wages (6.6% on other supplemental wages) while its top bracket is 12.3% (plus the 1% mental health services tax over $1 million), so a California vest can carry a state gap on top of the federal one. Washington, Texas, Florida, Nevada and the other no-income-tax states have no state gap at all. Enter both rates in the optional section to include it.

What this calculator does not do

It assumes your employer's regular withholding matches the tax on your salary alone, using the standard deduction (a standard Form W-4 with no extra withholding) — the default that creates the gap. If you add extra withholding, or your employer let you elect a higher rate on vests, the real shortfall is smaller by that amount. If you itemize, the itemized figure lowers the year's tax here but not the assumed withholding, unless your W-4 Step 4(b) already reflects it.
It ignores other income (interest, dividends, a spouse's wages if you enter only one salary), credits, the Alternative Minimum Tax, ESPP and stock options. It models RSUs only.
It shows Social Security and Additional Medicare as information; they are normally withheld correctly by payroll, with one exception — the 0.9% Additional Medicare Tax is withheld above $200,000 of wages regardless of filing status, while joint filers owe it above $250,000 combined. The Medicare figures treat the pre-tax field as 401(k)-type deferrals, which are still Medicare wages; Section 125 premiums and HSA contributions are not, so those slightly overstate it. The safe-harbor test here uses federal income tax only — Additional Medicare Tax and its withholding are left out and largely offset.
It does not tell you whether to sell, hold or cover. That is a decision about securities, and it depends on things a withholding calculator cannot know.

Educational estimate, not advice. This tool performs withholding arithmetic on compensation using tax-year-2026 federal parameters (IRS Rev. Proc. 2025-32 and Publication 15). It is not tax, legal or investment advice, it does not consider your full situation, and it may be wrong for yours. For decisions about estimated payments, withholding elections or your shares, work with a qualified tax professional. Nothing you enter leaves your browser. Built by KDesk Accounting.