RSUs at vest: the tax, sell-to-cover and your net worth

Restricted stock units feel like an investment. They show up in a brokerage account, they move with the share price, and the grant letter talks about value over four years. But on the day they vest, the IRS sees something simpler: pay. The shares' market value that day is wages, taxed like a bonus, and only what's left after tax is yours to invest, hold or spend.

That framing answers most RSU questions before they get complicated. This post walks through what happens on a vest date, what each of the three common choices does to your cash and your investments, why April often asks for more, and how a vest should show up in your net worth.

What the IRS sees on the vest date

An RSU grant is a promise of shares that you earn by staying. Until the shares vest you don't own them, and there's nothing to tax. When they vest, the fair market value of the shares that day becomes compensation, reported as wages on your W-2 along with your salary. (IRS Publication 525, Taxable and Nontaxable Income)

Your employer withholds on that income as supplemental wages, the same rules it uses for a bonus: a flat 22% federal rate, or 37% on supplemental pay above $1 million in the year. (IRS Publication 15, § 7) Medicare (1.45%, plus 0.9% on wages above $200,000), Social Security (6.2% until the year's wage base, $192,300 in 2027) and state tax apply as they would to salary. (SSA: contribution and benefit base)

After the vest, the shares are an ordinary investment. Your cost basis is their value on the vest date, the amount that was already taxed as pay, so selling right away produces little or no further gain. Anything the price does after that is a capital gain or loss when you sell. (Charles Schwab: how RSUs and PSUs are taxed)

One vest, line by line

Take a quarterly vest of 100 shares at $250, in California. These figures come from the tax and income code RichDue runs on your own vests.

Worked example

100 shares vest at $250

100 shares vest on February 15, 2027 at $250 a share

Withheld as supplemental wages: 22% federal, California 9.3%, Medicare 1.45%

Value at vest, taxed as pay

$25,000

Federal income tax (22%)

−$5,500

California (9.3%)

−$2,325

Medicare (1.45%)

−$362.50

Yours after withholding

$16,812.50

An example, computed with the tax and plan code RichDue runs on your own numbers. Social Security comes out too until your wages pass the year’s wage base.

Of the $25,000 vest, $8,187.50 is withheld for income tax and Medicare, leaving $16,812.50. If your wages for the year are still under $192,300, Social Security takes 6.2% of the vest too. On a quarterly schedule, that's 4 of these a year.

The withholding happens in shares, not cash, at most companies. That's what sell-to-cover means.

Sell-to-cover, sell everything, or keep every share

Most plans give you a default and sometimes a choice. Here is what each one does on the vest date to the two places money sits: cash and investments.

Worked example

Three ways the vest lands

The same $25,000 vest

What changes in cash and in investments on the vest date

Sell everything: cash

$15,262.50

Sell to cover: shares kept

$15,262.50

Keep every share: shares kept

$25,000

Keep every share: tax paid from cash

−$9,737.50

An example, computed with the tax and plan code RichDue runs on your own numbers. Net worth rises by the same amount in all three; only where it sits changes.

• Sell everything at vest. The broker sells all the shares, sends the withholding to the IRS and the state, and the rest lands as cash: $15,262.50. You own no new stock.
• Sell to cover. The broker sells just enough shares to pay the withholding and deposits the rest as shares: $15,262.50 of stock, no cash. This is the default at most large employers.
• Keep every share and pay the tax from cash. Some plans let you hold all the shares and pay the withholding separately. You gain $25,000 in stock and lose −$9,737.50 from checking.

The three end in the same place for your net worth. The difference is concentration and liquidity. Sell-to-cover leaves you holding more of your employer's stock every quarter, on top of a salary, a bonus and future grants that already depend on the same company. Selling at vest turns each vest into cash you can direct anywhere. Neither is right for everyone, but holding should be a decision rather than the default you didn't change.

The April gap on a vest

The flat 22% is a withholding rate, not your tax rate. If your top federal bracket is 35%, each vest is under-withheld by the difference, 13% of its value. On this vest that's $3,250, and across 4 vests a year it's $13,000, due when you file.

This is the most common RSU surprise. A tech employee whose salary already puts them in the 32% or 35% bracket gets four vests a year withheld at 22%, and the shortfall arrives in one bill in April. If the stock went up during the year, the vests were worth more and the gap is bigger.

Three ways people handle it:

1. Sell a few more shares at each vest and keep the extra cash in a separate savings account for April.
2. Increase withholding on salary with a new W-4 (extra amount per paycheck). Withholding counts as paid evenly through the year, which helps with the underpayment penalty.
3. Ask whether your plan allows a higher withholding rate on vests. Some do, within limits.

The vest if the share price moves

A vest schedule is fixed in shares, not dollars. The 100 shares arrive on their date whatever the price is that day. That's why a plan built on the grant's dollar value drifts: the grant letter priced the shares on the grant date, sometimes years before they vest.

RichDue's plan prices each future vest at today's share price in the base case, and 20% lower or higher in the low and high cases. For the vest above, kept after sell-to-cover:

Worked example

The vest if the price moves

Sell to cover, as above

RichDue’s low and high cases: the share price 20% lower or higher on the day

Low case: $200 a share

$12,210

Base case: $250 a share

$15,262.50

High case: $300 a share

$18,315

An example, computed with the tax and plan code RichDue runs on your own numbers. Shares kept after withholding, the amount that reaches your net worth.

The range, $12,210 to $18,315 on a single vest, is why committing future vests to a down payment or a tax bill deserves a margin. Plan with the low case for anything with a date on it.

RSUs and your net worth

The cleanest way to count RSUs in net worth follows the tax: count shares when they vest, at their value after withholding, and treat unvested units as future income, not an asset. Unvested units disappear if you leave, and their dollar value is a guess until the vest date.

Counted that way, each vest adds the after-tax value to your net worth (shares or cash, depending on your choice) and from then on the shares move with the market like any other holding. Your net worth jumps four times a year on the vest dates and the plan shows those jumps ahead of time, which is more honest than a net worth that includes every unvested grant at today's price.

Two practical consequences:

• Concentration is visible. When vested employer stock is counted with your other investments, you can see what share of your net worth depends on one company.
• Vests are planning moments. A vest is the natural day to rebalance, top up a tax reserve or fund a goal, because it arrives on a known date with a known number of shares.

A checklist for each vest

• Know your schedule: dates, number of shares, and whether the plan sells to cover by default.
• Check the withholding rate your plan uses and whether you can change it.
• Estimate the April gap at your bracket and set it aside or adjust your W-4.
• Decide in advance whether you hold or sell, and how much employer stock is enough.
• Keep the vest confirmation: it records your cost basis, which you'll need when you sell.
• Look at your Form 1099-B when you sell. The basis it reports may leave out the income already taxed on your W-2; your broker's supplemental statement usually has the corrected figure.

Run the numbers

Vests are withheld exactly like a bonus, so the bonus take-home calculator gives the same lines: enter the vest's value on the date, your state and the federal rate. RichDue does the rest across the year: each vest on its date in low, base and high cases, what lands in cash or shares, and what it does to your net worth.

Sources

Checked October 30, 2026.

• IRS, Publication 525, Taxable and Nontaxable Income: restricted property is income when it vests.
• IRS, Publication 15 (Circular E): supplemental wage withholding at 22% and 37%.
• Social Security Administration, Contribution and benefit base: $192,300 for 2027.
• Charles Schwab, Restricted stock and performance stock taxes: basis at vest and the second tax event at sale.
• The price range (20% lower or higher) and California's 9.3% are RichDue's default assumptions, editable in the app.

Not tax advice. This is general information about how vests are taxed and withheld; your plan documents and a tax professional are the authority on your own grants.