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Your RSU & Equity Tax Calculator
2026 Tax Year

See exactly how much tax you owe on vesting, exercise, or sale — updated for 2026 federal brackets and the $184,500 Social Security wage cap.

Used to determine Social Security cap exposure
Salary / prior vests already subject to SS this year
Tax Breakdown at Vesting
Gross Income at Vest
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Take-Home After Tax
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Salary + other income before this exercise
ISO Exercise — AMT Analysis
Bargain Element (Spread)
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Est. AMT Owed
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What you actually paid (after discount)
ESPP Tax Breakdown
Total Proceeds
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Est. After-Tax Gain
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Tax Disclaimer: This calculator provides estimates for informational purposes only and does not constitute tax, legal, or financial advice. Results are based on 2026 federal brackets and may not reflect all applicable taxes, deductions, or individual circumstances. Consult a qualified tax professional (CPA or enrolled agent) before making financial decisions. State tax rates shown are simplified; local taxes not included.

Why Your Withholding Is Wrong

Employers withhold RSU taxes at the IRS supplemental rate of 22% — but if your total income pushes you into the 32%, 35%, or 37% federal bracket, you're under-withheld by up to 15 percentage points.

This calculator shows you the real gap so you can set aside the difference before April 15.

2026 Tax Rates Used

How RSU Taxes Work

01

Vesting = Ordinary Income

When your RSUs vest, the fair market value on that day is treated as W-2 ordinary income — taxed at your marginal federal + state rate, plus FICA (Social Security & Medicare). You owe tax whether you sell the shares or not.

02

The 22% Withholding Trap

Your employer withholds at the flat 22% IRS supplemental rate. If your total income puts you in the 32%, 35%, or 37% bracket, you owe the IRS an additional 10–15% out of pocket — often a surprise $10,000+ bill in April.

03

Social Security Cap

SS tax (6.2%) only applies to wages up to $184,500 in 2026. If your salary already exceeds the cap, no additional SS tax is owed on your RSU income. Many tech employees with high salaries miss this saving entirely.

04

After Vesting: Capital Gains

Once shares land in your account, your cost basis is the FMV on vest day. Future price appreciation is a capital gain — hold more than 12 months to qualify for the 15–20% long-term rate instead of your full ordinary-income rate.

05

Sell-to-Cover vs. Share Withholding

Some employers automatically sell a portion of your vested shares to cover taxes (sell-to-cover). Others withhold shares directly. Both methods result in the same tax liability — only the mechanics differ. Check your equity plan details.

06

Quarterly Estimated Payments

If your employer's 22% withholding leaves a large gap, the IRS can charge an underpayment penalty even if you pay in full by April 15. Large vesting events in Q3 or Q4 may require a Q4 estimated payment due January 15.

07

Additional Medicare Tax

A 0.9% Additional Medicare Tax applies once your total wages exceed $200,000 (single) or $250,000 (married). A large RSU vest can push you over this threshold mid-year, and your employer may not automatically withhold the extra 0.9%.

08

California's Long Reach

If you earned RSUs while living in California and then moved, CA may still tax a portion based on how much of your vesting period you spent in the state. This "source income" rule applies even years after you've left California.

12 RSU Tax Facts Most Employees Don't Know

01
Your W-2 already includes RSU income. Your employer adds the vested RSU value to Box 1 of your W-2. If you also report it separately on your return, you'll be double-taxed. Use the adjusted cost basis your broker reports — it should already reflect what's in your W-2.
02
Selling on vest day is tax-neutral for capital gains. If you sell shares the same day they vest, your sale price ≈ your cost basis, so there's virtually no capital gain or loss. The only tax event is the ordinary income at vesting — which you owe regardless.
03
The $1 million threshold changes your withholding rate. If a single RSU vesting event exceeds $1 million, the IRS requires employers to withhold at 37% (not 22%) on the amount above $1 million. This is automatic — your employer doesn't need to ask you.
04
RSUs from private companies create a cash problem. If your startup grants RSUs and there's no public market, you still owe tax on the FMV at vesting — even though you can't sell the shares to pay the bill. Many employees set aside cash from their salary in advance to cover this.
05
You can't contribute RSU shares directly to a 401(k). RSU income does increase your eligible compensation for 401(k) limits, but the shares themselves can't be transferred into a 401(k). You'd need to sell shares for cash, then contribute cash — subject to the 2026 limit of $24,500 ($32,500 if 50+).
06
Tax-loss harvesting can offset RSU gains. If you hold RSU shares that have dropped in value since vesting, selling them at a loss creates a capital loss that offsets other capital gains dollar-for-dollar, or reduces ordinary income by up to $3,000/year. Excess losses carry forward indefinitely.
07
83(b) elections do NOT apply to standard RSUs. An 83(b) election — which lets you pay tax at today's low value — only applies to restricted stock awards and early-exercise stock options, not to standard RSUs. If your company offers early-exercise options or restricted stock, an 83(b) can be extremely powerful if filed within 30 days of grant.
08
Donating appreciated RSU shares to charity beats selling them. If your RSU shares have appreciated since vesting, donating the shares directly to a qualified charity lets you deduct the full fair market value AND skip capital gains tax entirely. Selling first and donating cash means paying capital gains tax before donating.
09
International employees face double-taxation risk. If you lived in another country during any part of your vesting period, both countries may claim a share of your RSU income. Tax treaties exist to prevent full double-taxation, but the rules vary by country and situation — a cross-border tax specialist is essential.
10
RSU vesting can trigger AMT for high earners. While RSUs themselves don't directly trigger the Alternative Minimum Tax, the large boost to your Adjusted Gross Income at vesting can reduce or eliminate AMT exemption phase-outs, indirectly increasing your AMT exposure — especially if you also exercised ISOs the same year.
11
Multiple vest dates in one year stack your tax bracket. If you have quarterly vesting (common at many tech companies), each vest adds to your cumulative income. Your first vest might fall in the 22% bracket, but later vests in the same year may land in the 32% or 35% bracket. Use this calculator with your total annual salary to see your true rate.
12
A lower stock price at vest means lower taxes — not just less value. If your company's stock has fallen significantly since your grant date, vesting at a lower FMV means a smaller ordinary income tax bill. Some employees choose to accelerate vesting or hold concentrated positions precisely because a lower vest price reduces the immediate tax burden.

How ISO Taxes Work

Incentive Stock Options (ISOs) work differently from RSUs — instead of receiving shares outright, you receive the right to buy shares at a fixed strike price. Exercising an ISO triggers no regular income tax, but it can trigger the Alternative Minimum Tax (AMT), a parallel tax system that catches many employees off guard.

01

The Bargain Element

Your taxable "spread" for AMT purposes is: Spread = (Current FMV − Strike Price) × Shares Exercised. This amount is added to your income for AMT calculations only — not for regular tax — the moment you exercise.

02

Tentative Minimum Tax Formula

AMT Base = AMT Income − AMT Exemption. Then: 26% applies up to $244,500 (2026), and 28% on anything above that threshold. This produces your "Tentative Minimum Tax."

03

You Only Pay the Excess

AMT Owed = max(0, Tentative Minimum Tax − Regular Tax). If your regular tax already exceeds the tentative AMT, you owe nothing extra. AMT is a floor, not an addition.

04

Exemption Phase-Out

The $90,100 (single) / $140,200 (MFJ) exemption shrinks by $0.50 for every $1 of AMT income above $500,000 (single) / $1,000,000 (MFJ) — OBBBA doubled this phase-out rate from the prior 25%. High earners can lose the exemption entirely by $680,200 (single) / $1,280,400 (MFJ).

05

Qualifying vs. Disqualifying Disposition

Hold shares 2+ years from grant AND 1+ year from exercise to qualify for long-term capital gains on the entire gain when sold. Sell sooner, and the spread becomes ordinary income instead.

06

The AMT Credit Carries Forward

If you pay AMT in the exercise year, you may generate a Minimum Tax Credit (MTC) that can offset regular tax in future years — effectively letting you recover some of the AMT you paid, spread over time.

10 ISO Tax Facts Most Employees Don't Know

01
Exercising ISOs costs cash up front, before any tax bill. You must pay the strike price × shares out of pocket to exercise, separate from any AMT you might owe. Many employees underestimate this exercise cost when planning a large exercise.
02
There's a $100,000 ISO limit per year. If the FMV of ISOs that first become exercisable in a calendar year exceeds $100,000, the excess is automatically treated as Non-Qualified Stock Options (NSOs) — losing the favorable ISO tax treatment.
03
Exercising early in the year gives you more flexibility. If you exercise in January and the stock drops by December, you may be able to sell before year-end in a "disqualifying disposition" to avoid AMT entirely — since AMT is based on the spread at exercise, but a same-year sale can eliminate that exposure.
04
ISOs expire — typically 10 years from grant, or 90 days after leaving the company. Unlike RSUs, unexercised ISOs simply disappear if you don't act in time. Leaving your job starts a short countdown clock.
05
AMT is calculated on Form 6251 — a separate tax return calculation. Most tax software handles this automatically, but it means your "real" marginal rate for ISO exercises can't be estimated using ordinary income brackets alone.
06
Private company ISOs create a "paper tax" problem. If your company isn't public yet, you may owe AMT on a spread you can't liquidate — paying tax on shares you cannot sell. This has bankrupted employees during downturns when illiquid stock later became worthless.
07
Exercising and holding (not selling) is what triggers AMT — not the grant. Simply receiving an ISO grant has zero tax consequence. The tax event only happens at exercise.
08
State AMT rules vary — and some states have none. California has its own AMT system with different exemption amounts than federal. Other states piggyback on federal AMT, and a few states don't impose AMT at all.
09
Spreading exercises across multiple years can reduce total AMT. Exercising a portion of your ISOs each year — rather than all at once — can keep your AMT income below phase-out thresholds in any single year, often resulting in lower cumulative tax.
10
An 83(b) election can apply to early-exercised, unvested ISOs. If your company allows early exercise before vesting, filing an 83(b) within 30 days locks in today's (often lower) spread for AMT purposes — a strategy unavailable once shares have already vested.

How ESPP Taxes Work

An Employee Stock Purchase Plan (ESPP) lets you buy company stock at a discount — often 15% off — through payroll deductions. The tax treatment splits your gain into two parts: ordinary income (the discount) and capital gain (everything else), with the split depending entirely on how long you hold the shares.

01

Disqualifying Disposition Formula

If sold before 2yr from offering / 1yr from purchase: Ordinary Income = (FMV at Purchase − Purchase Price) × Shares. This amount is always taxed as ordinary income, even if the stock later drops.

02

Qualifying Disposition Formula

If held 2yr from offering AND 1yr from purchase: Ordinary Income = MIN(Discount Element, Total Gain). The rest of your gain is taxed at the lower long-term capital gains rate (0%/15%/20%).

03

Capital Gain Calculation

Capital Gain = Total Gain − Ordinary Income, where Total Gain = (Sale Price − Purchase Price) × Shares. This portion gets capital gains treatment, not ordinary income treatment.

04

The "Lookback" Provision

Many ESPPs apply the discount to the LOWER of the stock price at the start or end of the offering period. This means your purchase price can be 15% below an even lower historical price — increasing your discount.

05

The Discount Is Taxed Regardless of Outcome

Even if the stock price crashes after purchase, the discount element (FMV at purchase minus what you paid) is still ordinary income. You can owe tax on a position that's now underwater overall.

06

Your Broker's 1099-B May Be Wrong

Brokers often report only your purchase price as cost basis, omitting the ordinary income already taxed via payroll. Without adjustment, this can result in being taxed twice on the same dollars — once as income, once as a phantom capital gain.

10 ESPP Tax Facts Most Employees Don't Know

01
The IRS limits ESPP purchases to $25,000 of stock value per year. This limit is based on the FMV at the start of the offering period, not the discounted price you pay — capping how much tax-advantaged purchasing you can do annually.
02
Qualified ESPPs (Section 423) get favorable tax treatment; non-qualified plans don't. Most large company ESPPs are Section 423 qualified plans, but some companies — especially smaller or international ones — offer non-qualified plans where the entire discount is always ordinary income.
03
You can typically withdraw from an offering period before purchase. If you change your mind mid-period, most plans let you stop contributions and get your payroll deductions refunded before the purchase date — no tax consequence if you withdraw in time.
04
Selling immediately ("flip") locks in the discount as guaranteed profit. Many financial advisors recommend selling ESPP shares immediately upon purchase to capture the discount as a near-risk-free gain, rather than holding for capital gains treatment and taking on stock price risk.
05
A 15% discount with a 6-month lookback can produce a much larger effective gain. If the stock rose significantly during the offering period, the lookback provision means your real discount versus the purchase-date price can exceed 15%, sometimes by a wide margin.
06
ESPP ordinary income appears on your W-2 only in the year of a disqualifying disposition. For qualifying dispositions, the ordinary income portion is reported in the year of sale, not the year of purchase — timing that affects which tax year absorbs the income.
07
Concentration risk applies the same way it does to RSUs. Continuously buying and holding your employer's stock through an ESPP ties your investment portfolio and your paycheck to the same company — a risk worth balancing against the discount's value.
08
Form 3922 reports your purchase details — keep it for tax time. Employers must issue Form 3922 after an ESPP purchase under a qualified plan, showing the grant date, purchase date, and prices. You'll need this to correctly calculate your cost basis adjustment.
09
A capital loss on ESPP shares can offset other gains. If you hold past purchase and the stock drops below your purchase price, the resulting capital loss can offset other capital gains or up to $3,000 of ordinary income per year, just like any other investment loss.
10
Qualifying disposition timing is calculated from TWO separate dates, not one. Both conditions must be met simultaneously: 2 years from the offering (enrollment) date AND 1 year from the purchase date. Missing either condition makes it a disqualifying disposition, even if you meet the other.

Frequently Asked Questions

What is the RSU tax rate in 2026?
RSU income is taxed as ordinary income at your marginal federal rate (10%–37%), plus state income tax, Social Security (6.2% on wages up to $184,500), and Medicare (1.45%, plus the 0.9% Additional Medicare Tax if your income exceeds $200,000 single / $250,000 MFJ). The effective all-in rate for a California tech worker in the 37% bracket can exceed 50%. Use the calculator above to see your personal estimate.
Why does my employer only withhold 22% on RSUs?
The IRS mandates a flat 22% supplemental withholding rate for employers on RSU income (37% on amounts over $1 million in a single payment). This is a withholding rule — not your actual tax rate. If your total income puts you in the 32%, 35%, or 37% federal bracket, you are responsible for paying the difference yourself at tax time, or via quarterly estimated payments to avoid an underpayment penalty.
Do I owe taxes on RSUs if I don't sell the shares?
Yes — this surprises many first-time RSU recipients. The IRS taxes you on the fair market value of your shares the moment they vest, regardless of whether you sell them or hold them. You've received something of value (the shares), so it counts as income. If you hold the shares and the price later drops, you paid taxes on a higher value than what they're now worth. This is why many financial advisors suggest selling enough shares to at least cover the tax bill on vest day.
What is the 83(b) election and does it apply to RSUs?
An 83(b) election lets you pay tax on unvested equity at its current low value rather than the future vesting-date value — so future appreciation is taxed as long-term capital gain rather than ordinary income. However, the IRS does not allow 83(b) elections for standard RSUs. They apply to restricted stock awards (RSAs) and early-exercise stock options. If you have those, the 83(b) must be filed within 30 days of grant — there are no extensions.
What's the difference between RSUs and ISOs?
RSUs deliver real shares at vesting — you owe ordinary income tax immediately with no choice. Incentive Stock Options (ISOs) give you the right to buy shares at a fixed strike price and you choose when to exercise. ISOs have no regular income tax at exercise (only AMT risk), and if you meet the qualifying holding period (2 years from grant, 1 year from exercise), all gains are taxed at the lower long-term capital gains rate. ISOs are generally more tax-efficient for employees who expect strong stock growth and can afford to hold.
How do I avoid a surprise tax bill from RSUs?
Three strategies: (1) Increase your W-4 withholding with your employer to withhold extra federal tax on each paycheck throughout the year. (2) Make quarterly estimated tax payments directly to the IRS — especially after a large vest in Q3 or Q4. (3) Set aside the gap (your marginal rate minus 22%) in a savings account immediately when shares vest, so the money is ready when you file. Use this calculator to estimate the exact gap before each vest event.
What does AMT mean for ISO holders?
The Alternative Minimum Tax (AMT) is a parallel tax system that ensures high earners pay a minimum level of tax. When you exercise ISOs, the spread between your strike price and the current FMV is added to your AMT income — even though you haven't sold and owe no regular income tax. In 2026, the AMT exemption is $90,100 (single) and $140,200 (MFJ), with phase-outs beginning at $500,000 and $1,000,000 respectively. Use our ISO tab to estimate your AMT exposure before exercising.
How does the ESPP calculator work?
An Employee Stock Purchase Plan (ESPP) lets you buy company stock at a discount — typically 15% below the lower of the price at the start or end of the offering period. When you sell, part of your gain is ordinary income (the discount) and part may be capital gains. A "qualifying disposition" (held 2 years from offering date AND 1 year from purchase) results in more favorable tax treatment where ordinary income is capped at the lesser of your actual discount or your total gain.
Can I deduct anything to reduce my RSU tax bill?
RSU income is W-2 income, so the usual W-2 tax reduction strategies apply: maximizing pre-tax 401(k) contributions (up to $24,500 in 2026), contributing to an HSA if eligible ($4,400 single / $8,750 family), and contributing to a Dependent Care FSA. None of these eliminate RSU taxes, but they reduce your total Adjusted Gross Income, which can lower your effective marginal rate on the RSU income.
Is this calculator accurate for my situation?
This tool provides a close estimate based on 2026 federal tax brackets and common state rates. It does not account for pre-tax deductions (401k, HSA, health insurance premiums), local city taxes (NYC, Philadelphia, etc.), the Net Investment Income Tax on investment portfolios, treaty benefits for non-US persons, or your specific itemized deductions. Always verify with a qualified CPA or enrolled agent before making financial decisions or filing your return.