RSUs have no discount and no lookback — the full fair market value at vesting is taxed as ordinary income immediately, whether or not the shares are sold.
How it works
Shares vesting multiplied by their fair market value gives the ordinary income recognized. The company typically withholds tax at the supplemental wage rate, often by withholding and selling a portion of the shares themselves — a “sell to cover” arrangement.
What this does not include
This computes the vesting-date tax only — a later sale of the retained shares creates a separate capital gain or loss, using the vesting-date FMV as the cost basis, which this calculator doesn’t project forward.
How to use this calculator
- Enter shares vesting and the fair market value per share.
- Enter the supplemental withholding rate.
A worked example
100 shares vesting at $50 fair market value per share, 22% withholding rate: ordinary income = $5,000, tax withheld = $1,100, shares withheld to cover tax = 22 shares, net shares received = 78 shares.
What the variables mean
| Variable | Meaning |
|---|---|
| Shares vesting | Number of RSU shares vesting on this date |
| FMV per share | Fair market value per share at vesting |
| Withholding rate | Tax withholding rate applied to the vesting income |
Edge cases worth knowing
RSU vesting is taxed as ordinary income at the full market value, not a capital gain. The tax hits the moment shares vest, regardless of whether they’re sold — a common surprise for people expecting capital gains treatment.
“Sell to cover” withholding means some shares never reach the employee at all — they’re automatically sold to pay the tax bill, which is exactly why net shares (78) come in below the shares that vested (100).
Frequently asked questions
Do I owe tax even if I don’t sell the shares?
Yes — RSU vesting itself is the taxable event, regardless of whether the shares are sold immediately or held.
What is “sell to cover”?
A common arrangement where enough shares are automatically sold at vesting to cover the tax withholding, so the employee doesn’t have to pay the withholding out of pocket.
Is the withholding rate always accurate?
Not necessarily — the flat supplemental rate can be lower than an employee’s actual marginal rate, especially for high earners, leaving a larger balance due at tax filing.
