Quick Answer
When RSUs vest, they're taxed as ordinary income at your full marginal tax rate plus FICA taxes (7.65%). If you vest $10,000 in RSUs and you're in the 24% bracket, expect roughly $3,765 withheld for taxes, leaving you with about $6,235 in take-home value.
Best Answer
Sarah Chen, CPA
Employees receiving RSUs or stock options as part of their compensation package
How RSU vesting affects your paycheck
When your Restricted Stock Units (RSUs) vest, they become taxable income on that exact day — just like receiving a cash bonus. The fair market value of the vested shares gets added to your regular paycheck and taxed at your full marginal tax rate plus FICA taxes (7.65% for Social Security and Medicare).
Your employer will typically use supplemental wage withholding rates, which can be either 22% federal (for amounts under $1 million) or your regular withholding rate — whichever results in more tax being withheld.
Example: $75,000 salary with $20,000 RSU vesting
Let's say you earn $75,000 annually and have $20,000 worth of RSUs vesting in one quarter:
Tax withholding on the RSU portion:
Stock options vs. RSUs: Different tax treatment
Key factors that affect your tax bill
What you should do
1. Plan for the tax hit: Set aside 35-45% of vesting value for taxes if you're a high earner
2. Consider selling shares immediately to cover taxes if you don't want to pay out of pocket
3. Adjust your W-4 if large vests are pushing you into underpayment territory
4. Track your basis for future capital gains calculations
Use our [paycheck calculator](https://explainmypaycheck.com/tools/paycheck-calculator) to model how RSU vesting will affect your take-home pay, and consider our [W-4 optimizer](https://explainmypaycheck.com/tools/w4-optimizer) to adjust withholding.
Key takeaway: RSUs are taxed as ordinary income when they vest, typically resulting in 35-45% total tax withholding depending on your bracket and state.
*Sources: [IRS Publication 525](https://www.irs.gov/pub/irs-pdf/p525.pdf), [IRS Publication 15](https://www.irs.gov/pub/irs-pdf/p15.pdf)*
Key Takeaway: RSUs are taxed as ordinary income when they vest, with typical total tax withholding of 35-45% including federal, state, and FICA taxes.
Tax treatment comparison for different types of equity compensation
| Equity Type | Tax Trigger | Tax Rate | Withholding Method |
|---|---|---|---|
| RSUs | Vesting date | Ordinary income + FICA | Automatic by employer |
| Incentive Stock Options | Exercise or sale | AMT or capital gains | Manual quarterly payments |
| Non-Qualified Options | Exercise date | Ordinary income + FICA | Automatic by employer |
More Perspectives
Marcus Rivera, CFP
High-income employees who may face additional tax considerations with equity compensation
High earner equity tax strategies
As a high earner, your RSU vesting creates unique tax challenges. You're likely in the 32% or 37% federal bracket, plus the 0.9% additional Medicare tax on income over $200,000 (single) or $250,000 (married filing jointly).
Tax rate reality for high earners
If you earn $200,000+ and have significant RSU vesting:
Strategic considerations
Timing vests across tax years: If possible, work with your employer to spread large vests across December/January to manage bracket impact.
Charitable giving opportunities: Donating vested shares directly to charity can provide significant deductions while avoiding capital gains.
Tax-loss harvesting: Use investment losses to offset the ordinary income from vesting.
Estimated tax payments: Large vests may require quarterly estimated payments to avoid underpayment penalties, especially if they exceed 110% of last year's tax liability.
Key takeaway: High earners face total tax rates of 45-50%+ on RSU vesting and should plan strategically around timing and offsetting deductions.
Key Takeaway: High earners face total tax rates of 45-50%+ on RSU vesting and should plan strategically around timing and offsetting deductions.
Marcus Rivera, CFP
Employees nearing retirement who need to coordinate equity compensation with retirement planning
Retirement timing and equity compensation
If you're within 5 years of retirement, the timing of your equity vesting becomes crucial for both tax planning and Social Security optimization.
Social Security coordination
RSU vesting counts as earned income for Social Security purposes until you reach full retirement age. Large vests could:
Medicare implications
Large RSU vests in your final working years can trigger Income-Related Monthly Adjustment Amount (IRMAA) surcharges on Medicare premiums. These surcharges are based on your modified adjusted gross income from two years prior.
Retirement account opportunities
Consider maximizing retirement contributions in years with large vests:
Key takeaway: Pre-retirees should coordinate RSU vesting with Social Security timing and Medicare planning to minimize long-term tax impact.
Key Takeaway: Pre-retirees should coordinate RSU vesting with Social Security timing and Medicare planning to minimize long-term tax impact.
Sources
- IRS Publication 525 — Taxable and Nontaxable Income
- IRS Publication 15 — Employer's Tax Guide - Supplemental Wages
Related Questions
Reviewed by Sarah Chen, CPA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.