Why Your RSU Tax Withholding Is Probably Wrong
Henry Supinski, ChFC® · 4 min read · July 2026
If you've ever been surprised by a tax bill the April after a big vest, the withholding on your RSUs is very likely the reason. It's not a mistake by your employer. It's just how the default rate works.
The Default Rate Is a Flat Percentage
Most employers withhold RSU income at a flat federal supplemental rate, commonly 22% up to a threshold and 37% above it, plus state withholding. That flat rate has nothing to do with your actual marginal tax bracket, which for many tech employees with a base salary plus vesting equity is well above 22%.
Where the Gap Shows Up
If your real marginal rate is 32% or higher and your RSUs were withheld at 22%, the difference doesn't disappear. It shows up as a balance due when you file, sometimes alongside an underpayment penalty if the gap was large enough across the year.
How to Close the Gap Before It's a Surprise
- Adjust your W-4 to withhold additional flat-dollar amounts from your regular paychecks.
- Make quarterly estimated tax payments if withholding alone won't cover the gap.
- Sell a portion of shares at vest specifically to cover the true tax liability, not just the withheld amount.
- Model out a large vesting year in advance, especially if it coincides with a bonus or other income spike.
Do This Before Your Next Big Vest
The fix is simple once you know it's needed: figure out your actual marginal rate, compare it to the flat withholding rate, and adjust before the vest, not after you've already spent the difference.