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Why Every Employee Should Estimate RSU Withholding
Why Every Employee Should Estimate RSU Withholding
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mian99629
11 posts
Sep 17, 2025
2:34 AM
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Restricted Stock Units (RSUs) are a valuable part of modern compensation packages, especially in tech, finance, and high-growth startups. While they can significantly increase your earnings, they also create tax obligations that are easy to underestimate. The simplest way to stay prepared is to use an RSU vesting tax calculator to project your liability before your shares vest.
How RSUs Are Taxed
When your RSUs vest, the fair market value of those shares is immediately treated as ordinary income. That means federal taxes, Social Security, Medicare, and possibly state taxes apply right away.
Most employers will withhold a portion of your shares to cover these taxes. However, they often rely on the IRS default federal withholding rate of 22%. If you’re in a higher bracket—such as 32% or 35%—the difference can lead to a tax bill when you file your return.
Why Estimation Is Crucial
Employees who don’t check their RSU withholding often face:
Under-withholding: Too little tax withheld, creating a year-end bill.
Over-withholding: Too much withheld, reducing your net payout.
State tax issues: Especially for those who move or work remotely.
Planning ahead helps you avoid all three outcomes.
How an RSU Vesting Tax Calculator Works
To run an estimate, you’ll need:
The number of RSUs vesting
The stock price at vesting
Your total annual income (including RSUs)
The withholding percentage used by your employer
Your state of residence
An RSU vesting tax calculator processes these inputs and provides a clear projection of your actual tax liability. This allows you to see whether your employer’s withholding is enough—or if you’ll need to set aside additional funds.
Bottom Line
RSUs can be one of the most rewarding parts of your pay package, but only if you manage the tax side effectively. Don’t wait for surprises at tax season. By using an RSU vesting tax calculator, you’ll gain clarity, avoid unexpected bills, and make the most of your equity compensation.
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