RSU Tax Planning: Withholding, Vest Decisions and the April Gap

When restricted stock units (RSUs) vest, the shares count as wages. Your employer withholds tax by selling some of them, usually at the flat federal supplemental rate of 22%. If your income puts you in the 32%, 35% or 37% bracket, that withholding falls short, and the difference shows up in April.

How RSUs Are Taxed

• At vest: the market value of the shares is ordinary income, reported on your W-2 like salary.
• Withholding: federal withholding on supplemental wages is a flat 22% up to $1M a year and 37% above that. California withholds 10.23% on bonuses and stock compensation.
• When you sell: any change in price after the vest date is a capital gain or loss, short-term if you held the shares 1 year or less.

The tax on the vest itself is set the day the shares arrive. What you can still plan is how much you pay through the year, what you hold afterward, and how the vest fits with the rest of your income.

Where the April Gap Comes From

An engineer in the 32% federal bracket has $80,000 of RSUs vest during the year. Payroll withholds 22%, or $17,600. At 32%, the federal tax on that income is $25,600. That leaves an $8,000 gap before state tax, due in April, plus a possible underpayment penalty if the year's payments fell short.

Hypothetical example for illustration only. Figures are simplified and rounded, and your results will differ. This is general education, not individual tax or investment advice; we coordinate the details with your CPA. Withholding rates: IRS Publication 15 (2026), supplemental wages.

A gap like this can be planned for before the vest. The right approach depends on your cash flow and your full tax picture, and we review it with you and your CPA. Federal safe-harbor rules generally protect you from the penalty if you pay 110% of last year's tax when your adjusted gross income (AGI) was over $150,000.

The Decisions Around Every Vest

• Hold or sell: shares you keep after a vest are an investment you chose to buy with that day's income. A plan sets the rule before the vest, so the default doesn't decide for you.
• Concentration: salary, unvested shares and held shares all ride on one company. Knowing how much of your net worth that is comes first.
• Employee stock purchase plans (ESPP): the discount is taxed as ordinary income, and how long you hold the shares changes how much.
• Incentive stock options (ISOs): exercising and holding past year-end can trigger the alternative minimum tax (AMT), so the timing deserves a projection first.

What a Plan Covers, and What It Costs

Financial planning is one flat monthly fee, set by your situation, with no setup fee. Your income and the size of your accounts don't change your price.

• Tax Strategy, $200 a month: tax projections and year-end moves, withholding on bonuses and equity pay, restricted stock and stock purchase plans, workplace plans and backdoor Roth, and charitable giving. Most clients start here.
• Complex, $300 a month: everything in Tax Strategy, plus stock options and private company equity.
• One Decision Plan, from $500: a single decision, such as a vest or a job offer, answered in writing. Credited in full if you start a plan within 60 days.

You keep managing your own investments. If you would rather we handle them, wealth management is 1% a year on the first $1M managed, 0.75% on the next $1M and 0.50% above $2M. See all pricing or read more about planning for tech and equity compensation.

Frequently Asked Questions

How much does RSU tax planning cost?

The Tax Strategy plan covers RSUs, stock purchase plans and withholding on equity pay for $200 a month, with no setup fee. Stock options and private company equity are in the Complex plan at $300 a month. A single vest decision can be a One Decision Plan, from $500.

Why do I owe tax in April when my RSUs were already taxed?

Withholding on vested shares is usually a flat 22% federal rate. If your bracket is 32% or higher, the withholding covers only part of the tax on that income, and the rest is due when you file.

Should I sell my RSUs when they vest?

That depends on how much of your net worth is already in your employer, your goals for the money and your tax picture. A plan sets the rule before each vest, so the decision is made on purpose.

Will you work with my CPA?

Yes. Equity pay touches your return every year, so we coordinate directly with your CPA.