RSU Calculator — Sell-to-Cover & 22% Withholding Gap
An RSU calculator that finds the gap between the mandatory 22% sell-to-cover withholding and your true marginal tax — across the $1M supplemental cliff, the 0.9% Additional Medicare surtax, your state stack, and double-trigger pre-IPO vesting. Free, no signup, runs entirely in your browser.
Last reviewed: June 2026 · Uses 2026 IRS rules — 22% supplemental (37% over $1M), 2026 brackets, $184,500 Social Security wage base, and current state rates
How the RSU Sell-to-Cover Calculator Works
When restricted stock units vest, your employer has to settle the tax that instant, and most companies use sell-to-cover: the broker liquidates just enough of the freshly vested shares to cover the 22% federal supplemental rate, your state supplemental rate, and FICA, then leaves the remaining shares in your account. The inputs this tool needs are the ones your stock-plan portal already shows — shares, vest-day price, vest date — plus your W-2 salary, state, and filing status. From there it walks each vest, applies the mechanical withholding, computes your real tax, and reports the difference.
That difference is the whole point. A flat 22% looks reasonable on a paystub, but it is a placeholder rate, not your rate. The scanner above turns every vest into two numbers — auto-withheld and actually-owed — and the delta is exactly what you will write a check for in April. Because the engine tracks cumulative supplemental income across the year, it also knows when a later vest tips you over the $1,000,000 line and the federal rate jumps, something a single-vest calculator silently misses.
The 22% Federal Supplemental Withholding Gap
IRS Publication 15 sets the rule plainly: supplemental wages — bonuses, commissions, and RSU vests — are withheld at a flat 22% as long as your cumulative supplemental income for the year stays under $1,000,000. Above that line the rate becomes 37% on the excess. Your employer cannot substitute your actual bracket; the 22% is the law for amounts under the cliff. So the moment your marginal rate climbs past 22%, every vested dollar is structurally under-withheld.
Walk a concrete case. A $200,000 vest for someone in the 35% federal bracket has $44,000 withheld at 22%, but $70,000 is actually owed federally — a $26,000 shortfall before a dollar of state tax. The RSU tax withholding the brokerage reports is correct under the rules and still leaves you owing the difference at filing. The Auto-Withheld vs True Tax bars in the tool draw both numbers side by side so the gap is impossible to miss.
The $1,000,000 Supplemental Cliff — 37% Federal Rate
The 37% supplemental rate is not reserved for executives. A staff engineer with four $156,000 quarterly vests, a sign-on bonus, and an annual bonus can cross $1,000,000 of cumulative supplemental wages somewhere in the third quarter. At that crossing the calculator blends the rate: the portion of the vest that fits under the $1,000,000 line is withheld at 22%, and the dollars above it jump to 37%. Employers frequently miscalculate this blend on the first vest that straddles the line.
The tool flags the exact vest that crosses the cliff and marks it in the scanner. If your August vest is the one that tips you over, the engine splits it — taxing the first slice at 22% and the remainder at 37% — and surfaces a warning to reconcile against your brokerage statement. Because the difference between 22% and 37% on a six-figure slice is tens of thousands of dollars, this is the single most expensive line to get wrong.
Net Shares Retained After Sell-to-Cover
The emotional number for most employees is not the tax — it is how many shares actually land in their account. The tool draws the journey for the full year: granted shares, the slice sold to cover withholding, and the net retained. For a 100-share vest at $150 with 22% federal, California\'s 10.23% supplemental, and 7.65% FICA, total withholding runs near 39.88%, so roughly 40 shares are sold and 60 are kept.
The sell-more view layers a second outcome on the same bar. If you voluntarily sell a few extra shares at vest to cover your true rate, you keep slightly fewer shares now but eliminate the April balance entirely. The calculator solves for that exact additional share count — the number of net shares from your RSU vest you would give up to buy out the gap — so the trade-off between holding more stock and owing a surprise bill is a deliberate choice rather than an accident.
Additional Medicare Tax (0.9%) on RSU Wages
The 0.9% Additional Medicare Tax applies to wages above $200,000 for single filers and $250,000 for married filing jointly — thresholds fixed by the Affordable Care Act and never adjusted for inflation. RSU vest income counts as wages for this surtax. On its own that sounds minor, but the withholding mechanics create a reliable shortfall.
Employers are required to withhold the surtax only once a single employer\'s wages pass $200,000, and they ignore your household total entirely. So a dual-earner couple where each spouse earns $190,000 sails past the $250,000 joint threshold, yet neither paycheck triggers employer withholding — the entire 0.9% on the excess comes due at filing. The calculator isolates this as its own line, computing the household liability against the employer-withheld amount, and flags the gap whenever your filing status and incomes create the trap.
Double-Trigger RSUs at Private Companies (Pre-IPO)
Most pre-IPO RSUs carry a double trigger: a time-based vesting requirement and a liquidity event such as an IPO, tender offer, or acquisition. Both must happen before any tax is due, which is why employees at Series C and later startups can hold years of time-vested shares with zero tax recognized. The catch is what happens when the liquidity trigger finally fires.
At the IPO, every share that has met its time requirement becomes ordinary income simultaneously, valued at the IPO price. Four years of accumulated grants can land as a single six-hundred-thousand-dollar-plus supplemental income event, almost guaranteeing a trip past the $1,000,000 cliff and the 37% rate. The double-trigger mode in the tool recognizes income at IPO price times shares and treats the 409A price purely as cost basis for the later capital-gains stage — and it warns that a post-IPO price drop during lockup does not shrink the bill, because the tax was fixed at the IPO-day value.
Quarterly Estimated Tax Payments for RSUs (Form 1040-ES)
When sell-to-cover leaves a gap large enough to risk a penalty, the remedy is quarterly estimated tax. Form 1040-ES payments are due April 15, June 15, September 15, and January 15 of the following year. The two safe harbors are simple: pay in 110% of last year\'s total tax, or 90% of this year\'s projected tax. Clear either floor and the IRS underpayment penalty does not apply, even if you still owe a balance at filing.
The forecaster maps each quarterly vest to its corresponding 1040-ES deadline and plots your cumulative gap against the cumulative safe-harbor target. If you are behind at a checkpoint, the line diverges and the tool tells you the catch-up payment. Pairing the quarterly estimated tax view with the sell-more recommendation gives two equivalent ways to stay penalty-safe: liquidate extra shares at vest, or write the 1040-ES check on the next deadline.
RSU Tax by State — California, New York, Washington, and No-Tax States
State tax can double the size of the gap. California treats RSU vests as ordinary wages at up to 13.3%, yet withholds only at its 10.23% supplemental rate for stock and bonus income — a built-in three-point state shortfall layered on the federal 22% gap. New York reaches 10.9% at the top, and New York City residents add up to 3.876% in local tax, pushing a high-earner NYC vest toward a combined state-and-local rate near 14.8%.
Nine states levy no wage income tax at all — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. A remote worker who vests in Texas owes only the federal gap, while the same vest in California stacks another 13% on top. The State Tax Stack-On bar compares your state of residence against California, New York, Washington, and Texas directly, so an RSU tax calculator for California, New York, or Washington is really just this tool with your state selected.
Ordinary Income vs Capital Gains — The Two-Stage RSU Tax
An RSU is taxed twice on two different clocks. The vest is stage one: the full fair-market value is ordinary income, hit by your marginal rate, Social Security, Medicare, and state tax. This is the stage the 22% sell-to-cover addresses and the stage this calculator models. As an RSU ordinary income calculator, it stops at the vest because that is where the withholding gap lives.
Stage two only matters if you keep the shares and sell later. The gain or loss between the sale price and the vest-day value is a capital gain — short-term and taxed at ordinary rates if held under 12 months, long-term at 0/15/20% if held 12 months or more. A common mistake is double-counting: the vest-day value was already taxed as wages, so only the appreciation after vest is a capital gain. Selling immediately at vest produces essentially no stage-two gain, which is why so many employees sell-to-cover and diversify the rest right away.
What to Do If Your Employer Under-Withheld on RSUs
Discovering a gap is not an emergency — it is a planning problem with three clean fixes. First, make a Form 1040-ES payment this quarter to catch up to a safe-harbor floor; this is the fastest way to neutralize penalty exposure. Second, raise your paycheck withholding on W-4 line 4(c) so future paychecks quietly cover more of the gap. Third, sell additional shares yourself at the next vest — the difference between sell-to-cover at 22% and selling enough to cover your true rate.
The choice between RSU vs sell-to-cover adjustments comes down to how much stock you want to hold. Voluntarily selling more shares preserves cash but reduces your position; a 1040-ES payment preserves shares but requires cash on hand. The report card grades whether you are currently on a safe-harbor path, and the reverse calculator solves any of the three angles — the exact shares to sell, the percentage to sell, or whether your vest price is low enough that 22% actually covers you.
Frequently Asked Questions
How does an RSU sell to cover calculator work?
Sell-to-cover is one of three ways employers settle the tax on a vest — the other two are net-share withholding and cash payment. With sell-to-cover, the broker mechanically sells enough shares the moment they vest to cover the 22% federal supplemental rate plus your state supplemental rate plus FICA, then deposits the rest. The problem this calculator solves: that mechanical 22% almost never matches your actual marginal rate. It scans each vest, compares the auto-withheld amount to your true tax, and shows the dollar gap you'll owe at filing.
Why is my RSU tax withheld at 22% if I'm in the 35% bracket?
Because IRS rules (Publication 15) require supplemental wages — bonuses, RSU vests, commissions — to be withheld at a flat 22% for amounts under $1,000,000 of supplemental income in a calendar year, and 37% above that line. Your employer has no discretion to use your real bracket. So a 35%-bracket employee on a $200,000 vest sees $44,000 withheld federally (22%) while $70,000 (35%) is actually owed — a $26,000 federal gap that lands on the April 15 return.
What happens if my employer under-withholds on my RSU vest?
You owe the gap when you file, by April 15. There is no employer penalty — the burden is entirely on you. You may also owe an underpayment penalty if your total withholding falls short of both safe harbors: 90% of this year's tax and 110% of last year's total tax. The fix is either to sell extra shares yourself at vest or to make a quarterly Form 1040-ES payment to reach a safe-harbor floor before the penalty applies.
How much RSU tax do I owe in California?
California taxes RSU vest income as ordinary wages at your CA marginal rate, up to 13.3% at the top (12.3% base plus the 1% Mental Health Services tax over $1M). But CA only withholds at its 10.23% supplemental rate for stock and bonus income — a built-in 3-point state shortfall on top of the federal 22% gap. A top-bracket Californian routinely faces a combined 45%+ true rate against roughly 32% auto-withheld, so the under-withholding stacks state on top of federal.
How do I calculate net shares retained after RSU sell to cover?
Net shares = granted shares − ceil(total withholding ÷ vest-day price). For a 100-share vest at $150 ($15,000 gross) with 22% federal, California's 10.23% supplemental, and 7.65% FICA, total withholding is about 39.88% — roughly $5,982, which is 40 shares sold to cover, leaving 60 retained. The calculator's Net Shares Retained bar shows granted, sold-to-cover, and what you'd keep if you followed the sell-more recommendation.
What is double-trigger RSU taxation at IPO?
Pre-IPO RSUs usually carry a double trigger: they require both time-based vesting AND a liquidity event such as an IPO, tender offer, or acquisition. Until the liquidity trigger fires, nothing is taxable. When it fires, every share that has met its time-vesting becomes ordinary income at once — often four years of accumulated grants hitting a single calendar year. That single-year spike frequently blows past the $1,000,000 supplemental cliff, pushing the excess to the 37% federal rate.
Do I owe the Additional Medicare Tax on RSU vests?
Yes. The 0.9% Additional Medicare Tax applies to wages over $200,000 single or $250,000 married filing jointly, and RSU vest income counts as wages. The trap: employers only withhold the surtax once a single employer's wages exceed $200,000. In a dual-earner household where the couple clears $250,000 combined but neither paycheck alone hits $200,000, neither employer withholds it — so the full surtax comes due at filing.
How do quarterly estimated tax payments work for RSUs?
If your under-withholding risks a penalty, you make quarterly Form 1040-ES payments, due April 15, June 15, September 15, and January 15. The safe harbors are 110% of last year's total tax or 90% of this year's tax — hit either and the penalty disappears. The calculator maps each quarterly vest to its 1040-ES deadline and tracks your cumulative gap against the safe-harbor target so you can see whether you're behind at each checkpoint.
Are RSUs taxed as ordinary income or capital gains?
Both, in two stages. Stage one is the vest itself: the full fair-market value is ordinary income, taxed at your marginal rate plus Social Security, Medicare, and state tax. Stage two happens only if you later sell the shares — the difference between the sale price and the vest-day value is a capital gain or loss, short-term if held under 12 months (ordinary rates) or long-term if held 12 months or more (0/15/20% rates). This tool models stage one, the part the 22% sell-to-cover applies to.
How do I calculate RSU tax in New York?
New York taxes RSU vest income as ordinary wages at the state marginal rate, which reaches 10.9% at the highest brackets. New York City residents add up to 3.876% in local tax on top, so a high-earner NYC vest can face a combined state-and-local rate near 14.8% stacked onto the federal 22–37%. As with California, the 22% federal supplemental withholding leaves a large gap that surfaces only when you file.