Why 22% isn't enough
When your RSUs vest, the IRS treats the full market value as ordinary wage income on that day. Your employer must withhold federal tax on it, and the rule for supplemental wages is a flat 22% (37% for any amount above $1M in a year).
But your actual tax on those dollars follows your marginal bracket. A $180k vest on top of a $220k salary is taxed at 32% and 35%, not 22%. The flat withholding falls short, and you find out in April.
The gap is usually thousands. On a big vest year it can be tens of thousands, plus an underpayment penalty if nothing was done during the year. The penalty part is the avoidable part: that's what the safe harbor is for.
What vest-day taxation actually is
On the day shares vest, the full market value counts as wages. If 100 shares vest at $100, that's $10,000 of ordinary income, and it appears on your W-2 like any other paycheck.
Your employer typically sells a chunk of the vesting shares (sell-to-cover) to fund the 22% withholding. You keep the rest.
If you later sell those remaining shares, you owe capital gains tax only on the price change since vest. The vest-day value is your cost basis, a fact brokers frequently get wrong on the 1099-B.
Six questions we get a lot
Do I really owe tax on RSUs I haven't sold?
Yes. Vesting is the taxable event, not selling. The IRS treats the market value on vest day as ordinary wage income, whether or not you sell the shares.
What is the safe harbor and why does it matter so much?
Pay in at least 110% of last year's total federal tax during this year, through withholding or estimated payments, and the IRS charges no underpayment penalty even if you owe a large balance at filing. It's the one number that takes the penalty risk to zero.
Should I sell the shares immediately at vest?
That's a separate question from the tax question; the tax is owed either way. The sell-or-hold page walks the factors without attaching advice.
Why does my broker say my cost basis is $0?
Because the 1099-B reports what you paid ($0 for granted shares), not the value that was already taxed as wages on vest day. Left uncorrected, you pay tax twice on the same money. The cost-basis page has the fix.
Do you store any of the numbers I type in?
No. The calculator runs entirely in your browser. There's no backend, no analytics on your inputs, no email capture, no account. Close the tab and it's gone.
Is this tax advice?
No. These are educational estimates that give you the rough shape of the situation. For an actual return, work with a CPA or EA who can see your full picture.
Sources: IRS Publication 15 (supplemental wage withholding); Publication 505 (withholding and estimated tax); Rev. Proc. 2025-32 (2026 inflation adjustments). Federal parameters: 2026 tax year; page updated July 2026.
Educational estimates only. Not tax, legal, or accounting advice. Confirm your plan with a CPA or EA.