Why is only 22% withheld on my RSUs?

Vesting RSUs are treated as supplemental wages, and employers commonly withhold federal tax on supplemental wages at a flat 22% rate for amounts up to $1 million in a year. That rate is not tied to your actual bracket. If your household income puts you in the 32% or 37% bracket, the flat rate under-withholds and the difference is owed when you file.

How accurate is this estimate?

It is a directional estimate, not a tax projection. It uses 2025 federal brackets, assumes the standard deduction, and applies a flat state rate estimate. It does not account for your other deductions, credits, other withholding, capital gains, or anything else in your return. The point is to show whether a gap exists and roughly how large it is, early enough for you to do something about it.

What can I do if I am under-withheld?

There are three practical routes: increase your W-4 withholding for the rest of the year, make a quarterly estimated payment to cover the shortfall, or sell shares at vest to fund the tax. Which one fits depends on your cash flow and whether you were going to sell anyway. Underpayment penalties can also apply, which is another reason to work this out before filing season.

Should I just sell my RSUs when they vest?

It is worth considering, because RSUs are taxed as ordinary income at vest regardless of whether you sell. Holding is therefore a separate investment decision from the compensation itself. A useful test: would you buy that stock with a cash bonus of the same size? If the answer is no, holding deserves a second look.

Does this work for stock options too?

No, options work differently and this tool does not cover them. Non-qualified options create ordinary income on the spread at exercise, withheld like wages. Incentive stock options can trigger alternative minimum tax in the year you exercise, even if you sell nothing. Both need their own analysis, and the equity compensation planning page covers how that works.

What happens to the information I enter?

The estimate is calculated in your browser and nothing is transmitted while you type. If you choose to unlock the full breakdown, your name, email, and the figures you entered are sent to us so we can follow up with something useful. There is no mailing list and no automated sequence.

Free tool

The tax bill nobody warns you about before a vest

Your employer withholds federal tax on vesting RSUs at a flat 22%. If your household sits in the 32% or 37% bracket, that withholding is short, and the difference arrives as a bill at filing. Five inputs will tell you roughly how large the gap is.

Five inputs

Nothing is sent anywhere while you type. The estimate updates as you go.

Filing status

Married, jointSingle

Your state

Household income before this vest

Salary and bonus for you and your spouse, not counting the shares below.

Shares vesting

Share price

Uses 2025 federal brackets and assumes the standard deduction. State figures are flat-rate estimates. Your actual result depends on deductions, credits, other income, and other withholding.

Your estimate

Estimated shortfall between what your employer withholds and what this vest is likely to cost you

$19,052

Value at vest: $180,000
Withheld by your employer (22%): $39,600
Estimated total tax on the vest: $58,652

Your employer withholds a flat 22% on vesting shares. Stacked on top of $350,000 of income, this vest lands in the 32% federal bracket, so roughly 32.6% of it is owed once state tax and the additional Medicare tax are counted. The difference shows up when you file.

Why this happens

A flat rate meeting a graduated system

When RSUs vest, the value becomes ordinary income to you, and your employer has to withhold something. Payroll systems treat that as a supplemental wage and apply a flat federal rate of 22% for amounts up to $1 million in a year. Simple for payroll, and completely disconnected from your actual bracket.

Meanwhile the federal system is graduated. Your vest stacks on top of your salary and bonus, so it is taxed at the top of your income, not the average of it. For a household well into six figures that top slice is frequently 32% or 37%, before state tax and the additional Medicare tax on wages above $200,000 single or $250,000 married.

Sources: the 22% flat rate on supplemental wages up to $1 million is set out in IRS Publication 15, and the 0.9% additional Medicare tax thresholds in IRS Topic 560. Both are worth reading once if this affects you every year.

The gap between those two numbers is real money, and it is the single most common surprise we see in a first meeting with an executive. It is also entirely fixable once you know the figure, which is the whole point of this page.

The deeper work is on the equity compensation planning page, and if a liquidity event is on the horizon, the IPO and acquisition planning page covers what needs deciding first.

Straight answers

Questions about the RSU tax gap

This material is for general educational purposes only and is not intended as tax, legal, or investment advice. Neither GGM Wealth Advisors nor Cambridge provides tax or legal advice. Please consult a qualified professional about your specific situation. Estimates are illustrative, based solely on the figures you enter and simplified assumptions. Your actual results will differ. Figures use 2025 federal brackets and flat state rate estimates, and assume the standard deduction with no other adjustments. GGM Wealth Advisors does not prepare tax returns.

Now do it with your actual grant schedule

This page gives you one number from five inputs. A conversation gives you the whole picture: every grant you hold, what the next two years of vesting cost, and a sale schedule that gets your concentration where you want it.

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