RSU Tax Guide
Why your company's 22% RSU withholding will cost you thousands
When RSUs vest, the share value is added to your W-2 as ordinary income — and the IRS treats it as supplemental wages. By law your employer withholds federal tax on it at a flat 22% (37% on any supplemental wages over $1,000,000 in a year). That flat rate is a payroll convenience, not your real tax. If your salary plus RSUs lands you in the 32%, 35%, or 37% bracket, the 22% withholding is 10–15 points short — and that shortfall is yours to pay.
The gap by income level
Here's the federal-only gap on a $100,000 vest at different salaries (single filer, 2026):
| Salary | Marginal rate | Withheld (22%) | Gap |
|---|---|---|---|
| $150,000 | ~32% | $22,000 | ~$10,000 |
| $200,000 | ~35% | $22,000 | ~$13,000 |
| $300,000 | ~35–37% | $22,000 | ~$15,000 |
Add state tax (California, for example, adds another layer up to 13.3% plus SDI) and the total surprise climbs further. The gap also compounds across quarterly vests — nothing on your pay stub flags the growing hole until you file.
What to do
Run every vest through the RSU tax calculator. It shows the exact gap and the quarterly amount to send to the IRS so you satisfy a safe harbor and avoid the Form 2210 penalty. Then read why sell-to-cover doesn't settle the bill and how to avoid being double-taxed when you sell.
FAQ
Is the 22% RSU withholding rate the same for everyone?
Yes for federal supplemental wages up to $1,000,000 in a calendar year — the IRS mandates a flat 22%. Above $1,000,000 the rate is 37% on the excess. It is not based on your personal bracket, which is exactly why a gap appears for higher earners.
How big is the withholding gap, typically?
For someone in the 32–37% bracket, the gap is roughly 10–15% of the vest value, before state tax. A $200,000 vest can leave $20,000–$30,000+ unpaid after the 22% withholding.
How do I avoid a penalty on the gap?
Make quarterly estimated payments that satisfy an IRS safe harbor: 90% of this year’s tax, or 100% of last year’s (110% if your prior-year AGI exceeded $150,000) — whichever is smaller. Pay via IRS Direct Pay before each quarterly deadline.