How Are RSUs Taxed? | Monument Wealth Administration

How Are RSUs Taxed?

When you perceive what RSUs are and how the grant-vest-sale lifecycle works, the following query is the one that truly prices cash in the event you get it unsuitable: how are they taxed?

The quick reply: RSUs are taxed twice. As soon as as unusual revenue once they vest, and once more as a capital acquire (or loss) once you promote the shares. The primary occasion is computerized. The second is in your management. The planning alternative lives within the hole between the 2.

The First Tax Occasion: Vesting

When your RSUs vest, the honest market worth of the shares on the vest date is handled as unusual revenue. It’s added to your W-2 alongside your wage, bonus, and every other compensation. There’s no particular charge. It’s taxed at your marginal revenue tax charge, the identical charge that applies to the final greenback of your earned revenue.

For 2026, federal revenue tax brackets for prime earners vary from 32% to 37%, relying on submitting standing and complete taxable revenue. These charges are topic to alter. When you’re receiving significant RSU grants, you’re seemingly in a type of brackets — which is strictly the place the withholding math begins to diverge from actuality.

Your employer withholds taxes on RSU revenue on the federal supplemental wage charge. For 2026, that charge is 22% on supplemental wages as much as $1 million, and 37% on supplemental wages exceeding $1 million. These charges are topic to alter. State taxes are withheld individually primarily based in your state’s guidelines.

The withholding charge just isn’t your tax charge. It’s a deposit towards your tax legal responsibility. If the deposit doesn’t match what you really owe, the distinction comes due once you file.

The Withholding Hole

That is the perception most executives miss till April.

Contemplate a hypothetical situation: an expert incomes $400,000 in base wage plus $200,000 in RSUs vesting in a single yr. Complete W-2 revenue: $600,000. For a single filer in 2026, that places a good portion of revenue within the 35% federal bracket.

The employer withholds at 22% on the RSU revenue (assuming complete supplemental wages are below $1 million): $44,000.

The precise federal legal responsibility on that $200,000, given the marginal charge: nearer to $66,000–$70,000, relying on deductions and different revenue components.

That’s a spot of roughly $22,000–$26,000 in federal taxes alone — earlier than state taxes. When you’re in a high-tax state, the entire shortfall grows.

This isn’t an error. It’s how supplemental wage withholding works by design. The issue is that many executives don’t see the hole till tax submitting, and by then, the money to cowl it has to return from someplace — financial savings, portfolio liquidation, or a cost plan.

The repair is easy: map your vesting schedule firstly of every yr, estimate your complete taxable revenue together with all RSU tranches, and make quarterly estimated tax funds to shut the hole earlier than it turns into a shock. An intensive tax plan could account for this earlier than the primary share vests, not after the final one has.

We walked by way of this withholding hole and how you can plan for it in additional element on Off the Wall. Watch the episode.

The Second Tax Occasion: Promoting

As soon as your RSUs have vested and also you personal the shares, the tax clock resets. Your price foundation is the honest market worth on the vest date — the identical quantity that was taxed as unusual revenue. From that time ahead, any appreciation is a capital acquire. Any decline is a capital loss.

The speed is dependent upon how lengthy you maintain after vest:

Brief-term capital good points (held one yr or much less after vest): Taxed at your unusual revenue tax charge. For 2026, which means as much as 37% federal for prime earners. There isn’t a preferential charge. That is similar to how your wage is taxed.

Lengthy-term capital good points (held multiple yr after vest): For 2026, the utmost federal long-term capital good points charge is 20% for taxable revenue above the relevant threshold, plus a possible 3.8% internet funding revenue tax (NIIT) for prime earners, bringing the efficient ceiling to 23.8%. These thresholds are topic to alter.

The differential between short-term and long-term charges is important. On a hypothetical $50,000 acquire, the distinction between a 37% charge and a 23.8% charge is $6,600. Whether or not that distinction justifies holding by way of the extra danger of a concentrated place is a call that is dependent upon your full monetary image — not simply the tax math.

Capital Losses and Wash Sale Guidelines

When you promote RSU shares beneath your price foundation (the honest market worth at vest), the loss is deductible. Capital losses offset capital good points greenback for greenback, and for 2026, as much as $3,000 in internet losses can offset unusual revenue per yr (topic to alter). Remaining losses carry ahead.

One vital rule: wash gross sales. When you promote shares at a loss and purchase considerably similar securities inside 30 days earlier than or after the sale, the IRS disallows the loss. This issues for RSU holders who additionally take part in an worker inventory buy plan (ESPP) or who obtain new RSU vests whereas promoting older positions. A sale at a loss in March adopted by an ESPP buy of the identical inventory in April can set off a wash sale and wipe out the tax good thing about the loss.

Planning round wash sale home windows is a part of constructing a practical promote technique. It’s a mechanical drawback, solvable with a calendar and consciousness, but it surely journeys up executives who handle their RSUs and ESPP participation individually.

Tax Planning Methods to Contemplate

A number of approaches could scale back the long-term tax impression of RSU compensation. These are instructional in nature. Particular person applicability is dependent upon your particular tax state of affairs and needs to be mentioned together with your CPA and advisor.

Mapping the vesting schedule yearly. Figuring out what’s vesting, when, and at what estimated worth makes complete revenue projectable and may help scale back the April shock.

Making quarterly estimated funds. If withholding is more likely to fall quick (and for prime earners with RSU revenue, it typically does), quarterly funds shut the hole incrementally slightly than in a single lump.

Evaluating the sell-at-vest strategy. Promoting at vest converts the RSU into money or diversified investments instantly. The capital acquire is zero (foundation equals honest market worth at vest), so the one tax is the unusual revenue already withheld. This simplifies the tax image and reduces focus danger. Traders could contemplate this as a default strategy, with exceptions for particular conditions.

Coordinating with different stock-based compensation. When you have inventory choices, ESPP shares, and RSUs, the tax technique could have to account for all three. Exercising ISOs in the identical yr RSUs vest, for instance, can set off AMT implications that change the optimum sequence.

Contemplating tax-loss harvesting within the broader portfolio. When you’re holding RSU shares and plan to promote at a acquire, harvesting losses elsewhere in your portfolio can offset the acquire. Direct indexing methods can generate incremental losses all year long that serve this objective — although wash sale guidelines require coordination throughout all accounts.

When RSU Tax Planning Will get Complicated

RSU taxation is easy in isolation. It will get advanced when layered with different compensation, different revenue sources, and different planning objectives.

A profession transition provides a wrinkle: unvested RSUs are usually forfeited, and the remaining vested shares want a promote technique that accounts to your new revenue stage. A yr between roles — with decrease complete revenue — could create a possibility to promote RSU shares at a extra favorable capital good points charge.

A significant liquidity occasion (enterprise sale, inheritance, property sale) in the identical yr as a big RSU vest compresses taxable revenue and may push you into greater brackets or section out deductions. Timing the sale of RSU shares round these occasions is the place the planning creates actual worth.

For this reason RSU tax planning isn’t a once-a-year train. It’s a rolling dialog tied to your revenue, your vesting schedule, and no matter else is going on in your monetary life that yr.

What to Do Subsequent

When you’re receiving RSUs, the tax dimension isn’t elective. It runs yearly, on a schedule you possibly can predict, and the price of not planning for it’s measurable.

The beginning questions: What’s vesting this yr and subsequent? What’s my estimated complete revenue? Is my withholding going to cowl it? And if I promote, when is the suitable time given every little thing else taking place in my monetary image?

A fee-only fiduciary who understands fairness compensation and tax planning can combine either side of the RSU equation — the funding determination and the tax determination — into a technique that works throughout years, not simply in a single submitting season. Desire to pay attention? We lined what to do when RSUs vest on Between Sips. Stream on Apple Music or Spotify.

In case your RSU tax technique might use a re-evaluation, that’s a dialog price having. Let’s discuss.