RSU Tax & Withholding Calculator 2025 – Vesting, Sell to Cover, Net
Estimate 2025 RSU tax and net proceeds at vest. Compare sell‑to‑cover vs cash‑to‑cover, supplemental withholding rates, and state taxes.
RSU Tax & Withholding Calculator 2025 – Vesting, Sell to Cover, Net
Introduction
When RSUs vest, shares are taxed as ordinary income and withholding applies. This guide estimates 2025 tax, sell‑to‑cover share count, and net proceeds.
Inputs
- Shares vesting and FMV
- Supplemental withholding rate and state tax
- Choice: sell‑to‑cover or cash‑to‑cover
Output
- Estimated tax withholding and shares sold
- Net shares or cash after withholding
Tips
- Actual tax may differ from withholding; settle on return
- Plan estimated payments if withholding is insufficient
- Consider diversification and capital gains on later sales
Related Tools
- Bonus Tax Calculator 2025: /calculator
- Capital Gains Tax 2025: /calculator
- Tax Bracket 2025: /calculator
CTA: Know Your RSU Net
Enter your vesting details to estimate tax, shares sold, and net proceeds at vesting.
RSU Taxation 2025: Key Mechanics
Restricted Stock Units (RSUs) are taxed as ordinary income when they vest based on the fair market value (FMV) of the shares delivered. Employers typically withhold taxes using either sell‑to‑cover (broker sells enough shares to fund withholding) or cash‑to‑cover (you pay cash to cover the withholding). The withholding rate for supplemental wages often uses default federal percentages; your true marginal rate can be higher or lower, creating a balance due or refund at filing.
Key concepts:
- Withholding vs true tax: Payroll withholding is an estimate; final liability is determined on your return.
- State and local taxes: Add on top of federal withholding; rates vary by state/city.
- Social taxes: FICA/Medicare apply up to wage bases (Medicare has no cap; 0.9% Additional Medicare may apply at high incomes).
- Basis tracking: Your cost basis equals FMV at vest; later sales produce capital gains/losses based on price changes after vest.
Methodology and Assumptions
- Compute ordinary income at vest: shares × FMV.
- Apply supplemental withholding rate (federal) and add state/local estimates.
- Add FICA/Medicare, including Additional Medicare if applicable.
- If sell‑to‑cover: determine shares to sell = total withholding / FMV (rounded up).
- If cash‑to‑cover: no shares sold, but ensure cash available for withholding remittance.
- Output withheld tax, shares sold (if any), and net shares/cash.
- Note: Actual annual tax may differ; reconcile on return.
Assumptions:
- Use 2025 supplemental withholding defaults as placeholders; confirm employer policy.
- State taxes modeled at a flat illustrative rate unless user provides a state; local taxes ignored unless provided.
- Brokerage commissions and fees are assumed negligible for share‑count estimates.
Examples (Illustrative Only)
Example A: Sell‑to‑Cover at Flat Rate
- 1,000 shares vest at $50 FMV → $50,000 ordinary income.
- Federal supplemental withholding 22% + state 5% + FICA/Medicare as applicable.
- Shares sold to fund withholding = tax due / $50.
- Net shares delivered = 1,000 − shares sold; later sale taxed as capital gains/losses vs $50 basis.
Example B: Cash‑to‑Cover for Max Ownership
- 1,000 shares at $50 → $50,000 income.
- You transfer cash to cover estimated withholding; receive all 1,000 shares.
- Risk: If your true marginal rate > withholding, expect balance due at filing—consider estimated payments.
Example C: High Earner and Additional Medicare
- Additional 0.9% Medicare applies above thresholds.
- Model incremental cost and confirm employer withholding; some employers withhold only standard 1.45% at vest, leaving 0.9% due on return.
Optimization Ideas
- Time sales for long‑term capital gains when possible; note that RSUs have zero holding period at vest, so long‑term requires holding beyond one year post‑vest.
- Use cash‑to‑cover to maximize shares if you have sufficient liquidity and risk tolerance.
- Coordinate RSU vests with bonuses and exercises to manage bracket spikes and NIIT thresholds.
- Harvest capital losses to offset short‑term gains from near‑term RSU disposals.
Frequently Asked Questions
Q: Why is my refund smaller (or balance due larger) after RSU vesting?
A: Supplemental withholding may under‑withhold relative to your true marginal rate; RSU income can also phase out credits/deductions.
Q: Do I pay Social Security on RSUs?
A: Up to the wage base; Medicare applies to all wages with an additional 0.9% over thresholds.
Q: What is double taxation at sale?
A: It’s a misconception. Your basis equals FMV at vest; only post‑vest changes are capital gains/losses. Ensure the broker reports correct basis (check 1099‑B and employer statements).
Q: Are ESPPs and RSUs taxed the same?
A: No. ESPP taxation depends on plan type and holding period; RSUs are ordinary income at vest.
State Notes (Illustrative)
- California/New York: High marginal rates; consider estimated payments if large vests.
- Washington/Texas/Florida: No state income tax but consider local levies and capital gains rules where applicable.
- City taxes (e.g., NYC) may apply in addition to state/federal.
Action Checklist (Copy/Paste)
- Gather vest schedules, grant docs, and employer withholding rates
- Decide sell‑to‑cover vs cash‑to‑cover by liquidity and risk
- Estimate total tax (federal/state/local + FICA/Medicare) and shares sold
- Track basis at FMV on vest date; verify broker 1099‑B basis
- Reconcile at filing; consider estimated payments for large grants