Specifics of your individual tax projection will be different from this generalized calculator
Why is RSU Underwithholding such a big deal?
When your RSUs vest, your company automatically withholds taxes at a flat 22% rate, but your actual tax rate is often much higher. This means you could be left with a large tax bill come April that you weren’t expecting.
Your withholding is going to be taxed at a higher tax rate
RSUs are taxed as ordinary income, but the IRS requires only 22% withholding—which is often far below your actual marginal tax rate. If your tax rate is 32% or higher, this creates a significant gap in what you owe versus what was withheld.
For every $400,000 of RSU, you have:
$60,000 of Underwithholding
If the stock price increases, so does your tax bill
Your RSUs are taxed at fair market value when they vest. If your company’s stock price rises after vesting, your tax liability increases as well.
If the stock price increase 50%:
$60,000 → $90,000
❌ Now you owe tax on shares that must be paid in cash
Even though your RSUs are taxed as ordinary income, the IRS expects payment in cash—not shares.
🚨 $90,000 in taxes due by April, but if you haven’t sold shares or set aside cash, you may not have enough on hand to cover the bill.
Cash owed at the end of the year:
$90,000
Marginal rate
Underwithholding
32%
$10,000 of underwithholding on every $100,000 of RSU
35%
$26,000 of underwithholding on every $200,000 of RSU
37%
$60,000 of underwithholding on every $400,000 of RSU
Get help with your RSU taxation planning
RSU taxation can be complex and costly if you’re not prepared. Here at KB Financial Advisors, we help you understand your RSU tax liability, plan for underwithholding, and make sure you’re not caught off guard when tax season arrives. Schedule an introductory call today to see how we can help.
