Why did my employer only withhold 22% on my RSUs?

In the US, RSU income is usually withheld at the flat 'supplemental wage' rate of 22% (rising to 37% on supplemental income above $1 million). If your real marginal tax rate is higher — often 32% or 35% for higher earners — the flat 22% under-withholds, and you settle the difference when you file.

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Free tool · United States

Will the tax withheld on your RSUs actually cover what you owe?

Q: Are RSUs taxed when they vest or when I sell?

RSUs are taxed as ordinary income when they vest, based on the share price on the vesting date — whether or not you sell. Any later change in price, from vesting to sale, is a separate capital gain or loss when you eventually sell the shares.

Q: How do I avoid a surprise RSU tax bill?

Estimate the gap between the flat withholding and your marginal rate, set that cash aside, and consider either increasing your payroll withholding (a new Form W-4) or making quarterly estimated tax payments. Remember state income tax and Medicare surtaxes are separate. Confirm with a qualified US tax adviser.

When RSUs vest, they’re taxed as ordinary income — and your employer usually withholds a flat 22% (the US “supplemental wage” rate). But if your real marginal rate is 32% or 35%, that 22% falls short — and you settle the difference when you file. See the likely gap in ten seconds, so April isn’t a surprise.

Written & maintained by the PrivateTechShares team · Published October 2026 · Reviewed October 2026

RSUs vesting this year — shares that vest in the year

Share price at vesting ($) — the market price on the vest date

Your other annual taxable income ($) — salary and the rest, before the RSUs

Filing status

State income-tax rate (%) — optional; 0 for no-tax states

Extra federal tax you may owe at filing

$—

the gap between the flat 22% withheld and your real marginal rate

RSU income this year$—

Flat federal withholding (22%)$—

Your estimated federal tax on it$—

Federal gap — likely owed at filing$—

How we keep this accurate. We write from primary sources — the IRS supplemental-withholding rules and the federal tax brackets — date every page, and review it regularly. This is independent, educational information, and deliberately not a substitute for professional tax advice on your own return.

A rough, directional estimate for orientation only — not tax advice. It compares the flat 22% federal supplemental withholding (37% on supplemental income over $1M) with the extra federal income tax your RSU income adds on top of your other income, using simplified federal brackets reviewed annually. It excludes Social Security and Medicare (incl. the 0.9% surtax), the standard deduction, credits, and your full return. State tax is shown separately and is usually withheld separately too. Confirm your number with a qualified US tax adviser.

Why this surprises people: the 22% flat rate feels like “tax is handled.” It isn’t — it’s a withholding rate, not your actual rate. A big vest stacks on top of your salary and is often taxed at 32–37%, so the shortfall lands as a bill in April. Knowing it now is how you set the cash aside or fix your withholding in time.

What to do about the gap

Set the cash aside

If there’s a shortfall, earmark it now rather than spending the shares. The surprise isn’t the tax — it’s not having planned for it.

Fix the withholding

You can ask payroll to withhold extra (a new Form W-4), or make quarterly estimated payments, so you’re not caught short next April. A tax adviser can set the amount.

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Questions people ask

Are RSUs taxed when they vest, or when I sell?

RSUs are taxed as ordinary income the moment they vest, on the share price that day — whether or not you sell. If you keep the shares and the price moves, that later change is a separate capital gain or loss when you eventually sell.

Why did my employer only withhold 22%?

22% is the IRS flat “supplemental wage” withholding rate (it rises to 37% on supplemental income above $1 million). It’s a default, not your real rate. If your marginal rate is higher, the flat 22% under-withholds and you owe the difference at filing.

How do I avoid a surprise RSU tax bill?

Estimate the gap (this tool), set that cash aside, and either increase your payroll withholding with a new Form W-4 or make quarterly estimated payments. Don’t forget state income tax and, for higher earners, the additional Medicare surtaxes. A qualified US tax adviser can set the exact amount.

Does selling RSU shares straight away create more tax?

Selling right at vesting usually creates little or no extra tax, because your cost basis is the vesting-day price you were already taxed on. Holding and selling later can create a capital gain or loss on the change in price since vesting.

General information only — not financial, tax or legal advice. Every situation is different; confirm your own numbers with a qualified US tax adviser. PrivateTechShares is an education and tools service: it is not a broker or marketplace, does not introduce buyers and sellers, does not hold funds, and does not execute or advise on transactions. Figures use simplified US federal assumptions and exclude state taxes, Social Security and Medicare.