An RSU bonus is a grant of restricted stock units: your employer’s promise to deliver shares of company stock on a future date once you meet the vesting conditions in your grant agreement. You don’t own anything on the day the grant is announced. You own shares only as each tranche vests, and the fair market value of those shares on the vesting date is treated as ordinary wages, added to your W-2, and taxed at your marginal rate. The default 22 percent federal withholding covers a piece of that bill, not usually the whole thing.
What an RSU Bonus Actually Is
Before vesting, an RSU is a bookkeeping entry. No voting rights, no dividends on the underlying shares, no ability to sell. You hold a contractual promise, not stock.
That distinction matters because it drives everything else. It’s why you can’t make a Section 83(b) election on RSUs the way you can with restricted stock awards: no property has transferred to you at grant, so there is nothing to elect on. The tax event is locked to the vesting date, whenever that turns out to be.
Some plans credit dividend equivalents on unvested units, either paying them out as they accrue or holding them until the underlying shares vest. When paid, they’re taxed as ordinary income rather than at the qualified-dividend rate.
When Shares Actually Vest
Your grant agreement spells out the schedule. Two structures dominate:
- Cliff vesting. Nothing vests until you complete a set period of service, often one year. On that anniversary, a block of shares vests at once.
- Graded vesting. Shares vest in installments over several years. A four-year schedule releasing 25 percent annually is standard at many large employers.
Many plans combine the two: a one-year cliff, then monthly or quarterly installments for the remaining shares. Once a tranche vests, those shares move from your employer’s internal ledger into your brokerage account and belong to you outright.
Private Company Grants Often Add a Second Trigger
At pre-IPO companies, RSUs commonly require two conditions before shares deliver. The first trigger is the time-based schedule. The second is a liquidity event such as an IPO or acquisition. Until both are satisfied, you receive no shares and owe no tax. That protects you from owing tax on stock you can’t sell, but it also means the units can sit in limbo for years if the company stays private.
How Much Your RSU Bonus Is Worth
The value of each vesting tranche is set by the stock price on the vesting date, typically the closing price on the public exchange that day. If 100 units vest when the stock trades at $150, the gross value of that tranche is $15,000.
This is the main difference from stock options. An option only has value if the market price exceeds your strike price; an RSU has value any time the stock is above zero. You still carry the risk that the price drops between grant and vesting, but there is no scenario where a vested RSU is worth nothing while the company is still trading.
Taxes at Vesting
The IRS treats vested RSU shares as ordinary income, identical to wages. The full fair market value on the vesting date is added to your W-2 and taxed at your marginal rate. For 2026, the top federal rate is 37 percent on taxable income above $640,600 for single filers. This happens whether or not you sell a single share.
Your employer must withhold federal income tax on these supplemental wages. The flat rate is 22 percent. If your total supplemental wages in the calendar year exceed $1 million, the rate on the excess jumps to 37 percent. These rates come from IRS guidance covering all supplemental wages, including RSUs, bonuses, and commissions.
Payroll taxes apply on top of income tax withholding:
- Social Security: 6.2 percent on wages up to $184,500 in 2026. If your regular salary has already pushed you past that ceiling, no additional Social Security tax hits the RSU income.
- Medicare: 1.45 percent on all wages, no cap.
- Additional Medicare Tax: An extra 0.9 percent on wages above $200,000 for single filers or $250,000 for married joint filers.
To handle withholding without asking you for a check, most employers use sell-to-cover. If 100 shares vest, the company automatically sells enough to satisfy the withholding obligation and deposits the rest in your brokerage account. You might end up with 70 shares after roughly 30 are sold for taxes; the exact split depends on your withholding rate and that day’s stock price.
The Withholding Shortfall
This is where people get surprised at tax time. The flat 22 percent supplemental rate is an estimate, not your actual tax rate. If your salary plus RSU income puts you in the 32 or 35 percent bracket, 22 percent withholding has underpaid your federal taxes by a meaningful margin. State income tax, in states that tax earned income, widens the gap.
The result is a large balance due when you file, sometimes with an underpayment penalty on top if you haven’t made estimated tax payments. Three practical fixes: increase W-4 withholding on your regular wages, make quarterly estimated payments to the IRS, or sell additional shares at vesting and set the cash aside. Ignoring the gap is the single most common financial mistake people make with RSU compensation.
Taxes When You Sell the Shares
Once shares vest and sit in your brokerage account, any further price movement is a capital gain or loss. Your cost basis is the fair market value on the vesting date, because you already paid ordinary income tax on that amount. Sell at $180 after vesting at $150 and you have a $30 per share gain. Sell at $120 and you have a $30 per share loss.
How the gain is taxed depends on how long you held after vesting:
- Short-term (one year or less): Taxed at your ordinary income rate, up to 37 percent.
- Long-term (more than one year): Taxed at 0, 15, or 20 percent depending on income. For 2026, a single filer pays 0 percent on long-term gains up to $49,450 in taxable income and 15 percent up to $545,500.
Losses can offset other capital gains. Losses beyond your gains can reduce ordinary income by up to $3,000 per year, with the remainder carried forward.
The 1099-B Double-Tax Trap
When you sell vested RSU shares, your brokerage issues Form 1099-B. The cost basis box frequently shows $0 or is left blank, because IRS rules prevent brokers from reporting the full adjusted basis for this type of compensation. If you file using that $0 basis, the IRS treats the entire sale proceeds as capital gain, and you pay tax on money you already paid income tax on at vesting.
The fix is the supplemental information form from your brokerage, which shows the adjusted cost basis reflecting the income you already recognized. Use that adjusted figure on Form 8949 and Schedule D. The supplemental information is not reported to the IRS automatically, so you have to enter it yourself. Skip this step and you’re paying tax twice on the same income.
What You Can Lose If You Leave
The general rule is blunt. Unvested RSUs are forfeited when you leave the company. If you’re two years into a four-year schedule and resign, the remaining two years of shares are gone. You keep only what has already vested and been delivered.
Grant agreements often carve out exceptions worth knowing about. Death and permanent disability commonly trigger immediate vesting of all remaining units, so the value passes to your estate or supports you through a health crisis. Some employers define retirement eligibility using an age-plus-service formula, such as a “rule of 70” with a minimum age around 55; qualifying employees may see their unvested RSUs continue to vest on the original schedule after they stop working. Missing that threshold by a year can cost significant equity, so check the rules before you set a retirement date.
A change of control introduces its own uncertainty. The acquirer might accelerate vesting and pay you in cash or its own stock, assume your RSUs and convert them into equivalent awards, or apply partial acceleration with the rest continuing under new terms. Some plans use double-trigger change-of-control provisions, where full acceleration only happens if you’re also terminated within a specified window after the deal closes. The outcome is set by your equity plan and the acquisition agreement, which is why reading the change-of-control section of your grant documents before a deal is announced matters far more than reading it after.