How Are RSUs Taxed, and What Can You Do About It? (2026)

How are RSUs taxed?

At grant, there's usually nothing to tax. An RSU is an unsecured promise to deliver shares or cash later, and a taxable event generally doesn't happen until it vests.

At vest and settlement, the fair market value of the shares delivered (or the cash paid) is ordinary income. It's reported in box 1 of your Form W-2 alongside your salary. RSUs are also wages for Social Security and Medicare taxes. For tax year 2026 that means 6.2% Social Security tax on wages up to $184,500, 1.45% Medicare tax on all wages, and a further 0.9% Additional Medicare Tax that employers withhold once your wages pass $200,000 in the calendar year.

When you sell, the difference between the sale price and your basis, the value already taxed at vest, is a capital gain or loss.

How much is withheld when RSUs vest?

RSU income is wages subject to federal income tax withholding. Pay that isn't regular wages, such as bonuses and commissions, is supplemental wages, and employers usually apply the supplemental rules to RSU vests. Under IRS Publication 15 for 2026, an employer can withhold a flat 22% (no other percentage is allowed under that method), and must withhold 37% on supplemental wages over $1 million paid to you in the calendar year, whatever your Form W-4 says. It can instead add the vest to your regular pay and use the wage tables in Publication 15-T.

Plans commonly cover the withholding by keeping back or selling some of the vesting shares. Your grant agreement or equity-plan account shows which method yours uses.

Why might 22% withholding not cover the tax you owe?

The 22% is a withholding rate, not your tax rate. RSU income is taxed at your marginal rate along with the rest of your income. For tax year 2026, a single filer's federal rate is 24% on taxable income over $105,700, 32% over $201,775, 35% over $256,225 and 37% over $640,600. For married couples filing jointly, those rates start at $211,400, $403,550, $512,450 and $768,700.

A simplified example: a $60,000 vest withheld at 22% has $13,200 taken for federal income tax. If all of that income falls in the 32% bracket, the federal income tax on it is $19,200, which leaves $6,000 to pay when you file. State income tax and the Social Security and Medicare taxes are separate.

Falling short can bring an underpayment penalty as well as a bill. IRS Publication 505 for 2026 says you generally avoid the penalty if your withholding and estimated payments cover at least 90% of your 2026 tax or 100% of your 2025 tax (110% if your 2025 AGI was over $150,000), and IRS Topic 306 adds that owing less than $1,000 at filing generally avoids it too. To close a gap, you can give your employer a new Form W-4 asking for extra withholding from each paycheck, or make estimated tax payments with Form 1040-ES.

What is your cost basis, and how do you avoid paying tax twice?

Property you receive for your work has a basis equal to the amount you include in income (IRS Publication 551). For RSU shares, that's generally their value at vest, the same amount that went on your W-2.

The trap is the broker's Form 1099-B. Brokers aren't allowed to add income from the vesting of equity awards granted after 2013 to the basis they report, so box 1e can show zero, or a figure that leaves out the income already on your W-2. If you use that number as it is, you report the vest value again as a gain and pay tax on it twice.

The fix is on Form 8949. The Form 8949 instructions say that when the basis on your 1099-B is incorrect, you enter code B in column (f) and correct the gain with an adjustment in column (g). Keep your vest confirmations, which show the shares and their value at each vest.

How do short-term and long-term holding periods work for RSU shares?

Your holding period starts the day after you acquire the shares, which for RSUs is when they're delivered at vest. Sell one year or less after that and any gain is short-term, taxed at your ordinary rates. Hold for more than one year and it's long-term (IRS Topic 409).

The vest itself is never a capital gain. That part is ordinary income whatever you do afterwards; only the change in price after vesting gets capital gains treatment.

Can you make an 83(b) election on RSUs?

No. An 83(b) election lets you include restricted property in income when it's transferred to you rather than when it vests, and it has to be filed within 30 days of the transfer (IRS Publication 525). It's built for restricted stock awards, where actual shares change hands at grant.

The IRS's equity compensation audit technique guide (Publication 5992) says RSUs aren't property under section 83 because no property is transferred at grant, so an 83(b) election can't be made for them. The guide notes it isn't an official pronouncement of law, but it matches how the IRS describes RSUs elsewhere, as an unsecured and unfunded promise.

Section 83(i) is a separate election. It lets qualified employees of certain private companies defer tax for up to 5 years on stock from broad-based RSU or option programs (Publication 525). It isn't a tool for RSUs from a listed company.

Should you sell RSUs at vest or hold them?

This is a trade-off, not a tax trick. The income tax on the vest is owed either way; what changes is what happens after it.

How do people frame the hold decision?

One common framing: if your employer had paid this vest in cash, would you spend all of it buying the company's stock? Keeping vested shares is economically close to making that purchase.

Concentration is the other half. FINRA warns that a large holding in your employer's stock ties your savings to the same company as your paycheck, and suggests counting company stock in your 401(k) when you add up your exposure.

What else can change the tax on RSU income?

• • Pre-tax 401(k) contributions lower your taxable wages. For 2026 you can defer up to $24,500, plus catch-up amounts from age 50 (IRS).
• • Capital losses offset capital gains, and up to $3,000 of net capital loss a year ($1,500 if married filing separately) can offset other income, with the rest carried forward (IRS Topic 409).
• • State income tax usually applies to RSU income as well, and the rules differ by state, so check with your state's tax agency.
• • When you sell matters. Moving a sale past the one-year mark, or into a different tax year, can change the rate a gain is taxed at.

When should you talk to a tax professional?

If your vests are large, you've moved states, your 1099-B basis doesn't match your records, or you also have stock options or ESPP shares, a tax professional can work through your return. This guide is general education about federal rules for tax year 2026.

Where does Ecomerate fit?

Ecomerate is an AI research analyst you text in iMessage. It doesn't give tax advice, and it never tells you to buy, sell or hold. If your RSUs pay in a US-listed stock, text it your position and a line on why you're holding. It reads new 10-K, 10-Q, 8-K and Form 4 filings for the company and texts you, quoting the passage, when something touches those reasons. If you opt in, it also texts on the Monday of a week when your holdings report earnings, with what your thesis hinges on. That puts the evidence in front of you when you weigh holding; the tax side stays with you and your tax professional.

Can it sell vested shares for you? Not yet; automated trading is coming soon. It needs an iPhone, iPad or Mac, has a free plan with 10 messages a week, and paid plans start at $11.99 a month.