How Do I Calculate RSU Income?

The formula

One line of math

RSU income = Vested Shares × FMV at Vesting. That gross figure lands on your W-2 as ordinary income.

Sell-to-cover default

Employer usually auto-sells a portion of vested shares to cover the taxes at vesting.

Bracket bump risk

RSUs can significantly increase your taxable income in a single year — plan for it.

Why the math matters

Tax planning starts with knowing the number

Restricted Stock Units (RSUs) are a valuable part of many compensation packages, especially in tech and corporate environments. When RSUs vest, they become taxable income — and understanding how to calculate that income can help you plan for taxes and make informed financial decisions.

01Four steps

The RSU income calculation in four steps

Identify the number of vested shares

Vesting typically follows a schedule set by your employer, such as annually or quarterly over a few years. Only the shares that have vested count as income for that tax year.

Determine the FMV at vesting

Find the fair market value (FMV) of your company’s stock on the date the RSUs vest. The FMV is usually the closing price of the stock on the vesting date. This value is key because it’s what the IRS uses to determine how much income you’ve received.

Multiply shares by FMV

To calculate your gross RSU income, multiply the number of vested shares by the FMV at the time of vesting.

Subtract withholding taxes

Just like your salary, RSU income is subject to tax withholding. Employers typically withhold federal income tax, state income tax, and FICA (Social Security and Medicare) taxes. Subtract these withholdings from the gross RSU income to find your net RSU payout.

02The formula

RSU Income = Vested Shares × FMV at Vesting

A worked example, showing the formula and how the income flows onto your W-2.

Example

If 100 RSUs vest and the stock is trading at $50 per share on that date:

Vested shares

100

FMV at vesting

$50

RSU income

$5,000

This $5,000 is treated as ordinary income and added to your W-2 wages.

03Withholding

Sell-to-cover vs. cash-to-cover

In many cases, your employer will automatically sell a portion of your vested shares to cover the taxes — a process known as “sell to cover.” Alternatively, you might pay the taxes out of pocket and keep all the shares.

Sell to cover (default)

Employer sells shares to pay tax

You receive net shares after withholding.
No cash outlay from you.
Reduces concentration in employer stock automatically.

Cash to cover

You pay tax from savings, keep all shares

Preserves position size in employer stock.
Requires cash on hand.
Only meaningful if you believe the stock will keep rising.

Estimate your RSU income before it hits the return

Use the formula — Vested Shares × FMV at Vesting — to estimate your RSU income, and work with a tax advisor to develop a strategy that minimizes your tax burden. Call (212) 641-0673.

Send the contact form (212) 641-0673

04Final thoughts

Prepare for the bracket bump

RSUs can significantly increase your taxable income in a given year, so it’s important to know how to calculate their value and prepare for the tax impact.

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RSU income calculated right

Get the RSU tax picture before the next vest

A single vesting event can move you into a higher bracket, trigger additional Medicare tax, and change your estimated payment obligations for the rest of the year. Call (212) 641-0673 or send the contact form. No charge for the conversation.