RSU Sell-to-Cover Explained (2026): What Gets Sold, What You Owe, and What to Do Next

If your brokerage statement says “sell-to-cover,” it means your employer sold some vested RSU shares immediately to fund payroll withholding. It is common, useful, and often misunderstood.

Start with your own numbers in the RSU Tax Calculator, then use this guide to interpret what happened.

What Sell-to-Cover Means

At vesting, RSUs become taxable wage income. Employers generally do this sequence:

1. Determine fair market value on vest date.
2. Calculate withholding obligations.
3. Sell enough shares to fund withholding.
4. Deposit the remaining net shares to your account.

You are still taxed on the full vest value, not just the shares you keep.

Why You Can Still Owe More Tax

The most common issue is federal withholding at a flat supplemental rate that is below your true marginal rate.

Example:

• Vest value: $80,000
• Federal withholding at 22%: $17,600
• Actual marginal federal rate: 32%
• Federal shortfall: about $8,000 (before state considerations)

State taxes, additional wages, and other gains can widen the gap further.

For the full withholding gap playbook, see RSU Tax Withholding: Why 22% Isn't Enough.

Sell-to-Cover vs Sell-All

Sell-to-cover

• Pros: keep equity exposure, automatic withholding.
• Cons: concentration risk remains; withholding may be incomplete.

Sell-all at vest

• Pros: reduces concentration risk immediately; simpler cash planning.
• Cons: no further upside on those shares unless you re-buy.

Neither is universally “best.” The right choice depends on concentration risk, liquidity needs, and conviction in holding employer stock.

Cost Basis Detail That Affects Filing

Your RSU cost basis is typically the fair market value at vesting. If broker forms show a mismatch, your reported gain can be overstated unless corrected.

Use RSU Cost Basis and Capital Gains: How to Report Vesting and Sales to reconcile forms accurately.

What to Do After Each Vest

1. Update your annual estimate in the Tax Calculator.
2. If there is a projected shortfall, adjust W-4 or make estimates.
3. Re-check concentration risk as total net worth changes.
4. Document vest price and retained-share basis for future sales.

If you sell legacy employer shares at a loss near vest dates, also screen for wash-sale windows with the Wash Sale Calculator.

Related Resources

• RSU Complete Guide (2026)
• RSU W-4 Withholding Adjustment Guide
• When to Sell RSUs: Complete Decision Guide