RSU W-4 Withholding Adjustment Guide (2026): Avoid a Surprise Tax Bill
RSU vesting is taxed as ordinary income, but many employers withhold at a flat supplemental rate that does not match your real marginal tax rate. The result is a surprise bill in April. The easiest fix for most employees is a targeted W-4 adjustment.
Step 1: Estimate Your Total RSU Tax Liability
Start with the RSU Tax Calculator to estimate how much federal and state tax you should owe on your vesting schedule.
If you want a deeper explanation of why the default rate falls short, read RSU Tax Withholding: Why the Default Rate Isn't Enough.
Step 2: Estimate Your Full-Year Tax Bill
Use the Tax Calculator to estimate your total tax for the year including salary, bonuses, and equity compensation.
Then compare that total to what will be withheld from your paychecks and vesting events. The gap is what you need to cover.
Step 3: Convert the Gap Into a Per-Paycheck Amount
If you expect to be short $6,000 and have 15 paychecks left, the fix is simple:
$6,000 / 15 = $400 extra withholding per paycheck
Enter that amount in W-4 Step 4(c) as extra withholding.
Step 4: Decide Between W-4 Changes and Estimated Payments
W-4 adjustments are easiest for most employees. Estimated payments are better when income is irregular or heavily weighted to the end of the year.
If you are unsure, start with W-4 changes and compare against the Estimated Tax Payments Guide.
Step 5: Recheck After Each Vesting Cycle
Every vesting date can change your total income. Recalculate after large vesting events, promotions, or bonus changes.
Common Mistakes to Avoid
- Counting RSU income twice. The vest value is already included in your W-2.
- Ignoring state taxes. State withholding can be just as far off as federal.
- Waiting until April. Fixing it now is easier and avoids underpayment penalties.
Related Tools and Guides
A small W-4 adjustment today is the simplest way to avoid a painful tax bill later.