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🇺🇸 US · US tax

Tax withholding (equity)

Also called: withholding, payroll withholding

In one line

Tax your employer deducts up front when equity is taxed as income, such as when RSUs settle or NSOs are exercised.

In plain English

When equity creates ordinary income, the company usually withholds tax immediately — often by holding back shares (sell-to-cover) or cash. The withheld amount may not cover your full bill.

If you were explaining it to a 5-year-old

When you get taxed on your toy winnings, the club takes some tax out straight away before you see the rest.

Why it matters when you sell

Default withholding on equity often under-covers what you owe, so plan for a top-up when you sell or file.

Related terms

Ordinary income (equity)Restricted stock unit (RSU)Non-qualified stock option (NSO)Sell-to-coverCost basis

Put it to use

RSU tax calculator

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Sources

Primary references for this term: IRS (US tax). Our definitions are written in plain English and kept evergreen — see the glossary methodology. General information, not advice.

Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.