RSU Tax Rates (2026): Federal, State, and FICA

RSU income gets hit by more tax layers than almost any other income type. At vest, you pay federal ordinary income tax, FICA (Social Security and Medicare), and state income tax — all in the same pay period. At sale, you owe capital gains tax and potentially NIIT. This page is a complete rate reference for 2026, with every number sourced to IRS publications and state revenue agencies.

Federal withholding rate at vest

When RSUs vest, your employer is required by IRS rules to withhold federal income tax at the supplemental wage rate.¹ For 2026, this rate is:

The threshold resets each calendar year per employer. If you're receiving RSU vests and a large bonus from the same employer in the same year, the combined total is what triggers the 37% rate — not each payment individually. Stock compensation from a new employer (including equity from a company you joined mid-year) starts its own $1M counter.

Your employer may optionally use the aggregate method instead — adding the RSU vest value to your regular salary and withholding based on your W-4 tables. This more closely reflects your actual marginal rate, but most large tech employers default to the flat 22% supplemental rate because it's simpler to administer. You generally cannot force your employer to use the aggregate method, but you can compensate via W-4 adjustments or quarterly estimated tax payments.²

Your actual marginal federal income tax rate

The 22% withholding rate doesn't change what you actually owe. Your RSU income is taxed as ordinary income at your marginal rate, determined by your total taxable income for the year.

The 2026 federal income tax brackets for single filers (from IRS Rev. Proc. 2025-32, as permanently extended by the One Big Beautiful Bill Act, July 2025):³

Note that these thresholds apply to taxable income — your gross income minus the standard deduction ($16,100 single / $32,200 MFJ in 2026) or itemized deductions, minus pre-tax 401(k) and HSA contributions. A software engineer with $180,000 in W-2 wages who maxes a traditional 401(k) ($24,500 in 2026) and takes the standard deduction has taxable income around $139,000 — landing in the 24% bracket, not 32%.

Capital gains tax rates at sale

After RSUs vest and you hold the shares, any gain (or loss) above your cost basis — the FMV at vest — is taxed as a capital gain when you sell. The applicable rate depends on your holding period and total income.⁴

The 2026 long-term capital gains rate thresholds (from Rev. Proc. 2025-32):³

The key insight: selling RSU shares within 12 months of vesting is taxed at ordinary income rates — the same rates that already applied at vest. Holding more than 12 months converts the post-vest gain to a lower LTCG rate. However, in high-income years, the post-vest gain stacks on top of your ordinary income, which pushes the LTCG into the 15% or 20% tier regardless of how long you held.

Net Investment Income Tax (NIIT)

A 3.8% surtax applies to net investment income — including capital gains on RSU shares you sell — if your Modified Adjusted Gross Income (MAGI) exceeds:⁵

• $200,000 for single filers
• $250,000 for married filing jointly
• $125,000 for married filing separately

These thresholds are not adjusted for inflation and have not changed since 2013. At a $250K salary, virtually every dollar of long-term capital gain from RSU sales is subject to NIIT. The NIIT does not apply to RSU vest income itself (which is W-2 wage income), only to the subsequent capital gain portion.

Effective top federal rate on long-term RSU gains for high earners: 23.8% (20% LTCG + 3.8% NIIT).

FICA taxes at vest

RSU vest income is W-2 wage income and is subject to FICA withholding — Social Security and Medicare — in the vest pay period.⁶

The practical effect: if your salary alone already exceeds $184,500, your RSU vest income owes no additional Social Security tax — only Medicare (1.45% + 0.9% if applicable). Most FAANG-level employees are past the SS wage base before any RSUs vest. If you're below $184,500 in salary at the time of a large vest, the SS tax adds up quickly: a $100K vest below the wage base adds $6,200 in Social Security tax.

Unlike capital gains, RSU income does not trigger NIIT at vest — NIIT only applies to investment income, not W-2 wages.

State income tax rates

State income taxes apply to RSU vest income at ordinary income rates in most states. California notably provides no preferential rate for capital gains — you pay the same rate on LTCG as on ordinary income.⁷

Caution for remote workers: Your tax domicile — not your employer's headquarters — determines which state taxes you. If you live in California and your company is headquartered in Washington, you pay California income tax on your RSUs. Conversely, if you move from California to Texas partway through a vesting period, California can still claim a portion of your RSU income under its workday allocation rules (California FTB Publication 1100). See the RSU state tax guide for the allocation formulas.

How it all adds up: a worked example

Scenario: Single filer, residing in California. Salary: $200,000. RSU vest in Q2: $150,000. Annual total W-2: $350,000. Maxes traditional 401(k) ($24,500) and HSA ($4,400). Taxable income: $350,000 − $24,500 − $4,400 − $16,100 (standard deduction) = $305,000.

On a $150,000 vest, this creates an under-withholding of roughly $19,455 in federal income tax alone ($150,000 × 13%), plus $1,350 in Additional Medicare Tax that payroll typically misses. Total gap: approximately $20,800 — plus any underpayment penalty if quarterly estimated tax wasn't paid. That's what shows up as the "April surprise."

What to do about the gap

Three options, in order of simplicity:

1. W-4 additional withholding: Add a dollar amount to line 4(c) of your W-4 to increase withholding from each paycheck. Benefits: retroactive penalty coverage for all quarters (the IRS treats withholding as if evenly distributed all year). See the W-4 adjustment guide for the exact calculation.
2. Quarterly estimated tax: Pay quarterly via EFTPS (federal) and your state's equivalent. Due April 15, June 15, September 15, January 15. The RSU estimated tax guide covers safe harbor amounts and payment mechanics.
3. Income reduction strategies: Pre-tax 401(k), HSA, mega backdoor Roth, charitable giving, and deferred compensation elections can reduce the income that gets taxed at these rates. See 9 ways to reduce RSU taxes.