How RSUs Are Taxed: At Vest and When You Sell

Reviewed by Herman Schroeder, CFA

Educational article, not personal advice

As of October 20, 2026.

The short answer

  • Restricted stock units (RSUs) are generally taxed as pay when the shares are delivered to you, usually at vesting.

  • The value on that day shows up as wages on your Form W-2, just like a cash bonus.

  • That same value becomes your cost basis in the shares.

  • When you sell, only the move in price since vest is a capital gain or loss.

What happens at vest

  • Nothing is taxed at grant. An RSU is a promise of shares later.

  • At vest, the value of the shares counts as wages. Income tax, Social Security and Medicare generally apply.

  • Most employers sell or hold back some shares to cover the withholding.

  • Your holding period for the shares starts at vest, not at grant.

Why 22% often isn't enough

  • Employers can withhold federal tax on bonuses and other extra pay at a flat 22%.

  • Once your extra pay from one employer passes $1 million in a year, the rate on the excess is 37%.

  • If your tax bracket is above 22%, the difference is due when you file.

  • Live in New York City? State and city tax apply too, so check those withholding lines as well.

  • Short for 2026? A new Form W-4 or an estimated payment can help. The last 2026 estimate is due January 15, 2027.

What happens when you sell

  • Held more than one year after vest: a long-term gain or loss, which may be taxed at a lower rate.

  • Held one year or less: short-term, taxed at ordinary income rates.

  • Sell soon after vest and the gain or loss is usually small, since your basis is close to the sale price.

  • Keeping the shares is a fresh investment decision. The tax on the vest is owed either way.

Three common mistakes

  • Paying tax twice. Check that the basis on your broker's Form 1099-B includes the amount already taxed on your W-2. If it doesn't, the IRS has you correct it on Form 8949.

  • Selling the wrong shares. If you can identify which lots you sell, you use their basis. If you can't, the IRS treats the oldest shares as sold first.

  • Tripping the wash sale rule. Sell at a loss and buy the same stock within 30 days before or after, and the loss can be disallowed for now. Ask your preparer whether a vest or an ESPP purchase near the sale counts.

Questions to ask before your next vest

  • When do my next shares vest, and about how much are they worth?

  • How much was withheld on this year's vests?

  • Is my tax bracket above 22%?

  • Which lots would I sell first, and how long have I held each one?

  • Does the basis on my 1099-B match what's on my W-2?

  • Review these with the person who prepares your return.

Have RSUs vesting and not sure what you'll owe? Book a call.

Window open and thinking about selling? Read Your Trading Window Just Opened. Should You Sell Company Stock?

Sources

Sources checked October 20, 2026. Tax rules can change.

Disclosures

  • General education. Not advice on your return.

  • Not individualized tax or investment advice.

  • Results depend on your full tax situation and law changes.

  • Investing involves risk, including loss of principal.

  • CFA® is a trademark of CFA Institute. Schroeder Capital Management, LLC is not affiliated with CFA Institute.