Dollar figures in this piece are for tax year 2026.
When restricted stock units vest, the value of the shares is paid to you as wages, and the employer withholds income tax on it. If the employer uses the optional flat method, the withholding is 22% of the vest value, whatever your bracket is. For a household whose last dollars are taxed at 32%, 35% or 37%, that 22% is a down payment. Nothing in the paycheck system tells you the rest is coming.
This page covers the rule, computes the shortfall on a 2026 return at three income levels, and lists the ways to close it before the year ends. It deals with federal income tax only. Your state, and the plan's own mechanics for paying the withholding, sit on top. For the broader picture of equity pay, see the equity compensation page.
What the 22% is, and what it is not
Wages for withholding purposes mean all remuneration for services, including the cash value of pay in any medium other than cash. Shares count. Pub. 15 treats anything that is not regular wages as supplemental wages. Bonuses, commissions and severance are examples, and the list is not limited to those. The employer gets a choice of how to withhold on them.
Suppose supplemental wages are paid separately from regular wages, or combined in one payment with the amounts specified, and the employer withheld income tax from your regular wages in the current or prior year. Then it can withhold a flat 22%. The alternative is to add the payment to regular wages and run the combined total through the withholding tables. Pub. 15 says the flat rate is an option, not a requirement, and no other percentage is allowed under that method. Your plan's vest statement shows which method your employer used.
The 37% rate is different because it is mandatory. To the extent supplemental wages paid to you by an employer (and businesses under common control with it) exceed $1 million in the calendar year, the excess is withheld at 37%, without regard to your Form W-4.
None of this changes what you owe. Restricted stock is included in gross income at fair market value when the rights become transferable or are no longer subject to a substantial risk of forfeiture, less anything you paid. RSUs follow the same practical pattern. The shares are delivered at vest, and the value is reported as W-2 wages and taxed at your ordinary rates with the rest of your pay. Your plan documents govern the exact settlement date.
Why the gap exists
Income tax is marginal. Your return stacks the vest on top of everything else, so the vest is taxed at the rates of the top slices of your income, not the bottom ones. A flat withholding rate ignores where those slices sit. The bracket-by-bracket mechanics are in your tax bracket is not your tax rate. The short version: the same $100,000 of vested stock costs different amounts depending on the income underneath it.
These are the 2026 thresholds from Rev. Proc. 2025-32. The 2026 standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers, and the rates apply to taxable income after that deduction.
2026 brackets
Taxable income above which each rate starts, Rev. Proc. 2025-32.
The table
| Rate | Married filing jointly | Single |
|---|---|---|
| 10% | $0 | $0 |
| 12% | $24,800 | $12,400 |
| 22% | $100,800 | $50,400 |
| 24% | $211,400 | $105,700 |
| 32% | $403,550 | $201,775 |
| 35% | $512,450 | $256,225 |
| 37% | $768,700 | $640,600 |
Worked example: three households with the same vest
Example, hypothetical: a married couple filing jointly in 2026 has a $100,000 RSU vest in the fourth quarter. The employer withholds a flat 22%, or $22,000. Their other wages are $250,000, $400,000 or $600,000 depending on the household. They take the standard deduction of $32,200, and we assume the withholding on their regular paychecks matches the tax on those wages. Everything else is ignored. I computed the tax on the wages with and without the vest and took the difference.
At $250,000 of wages, the whole vest lands in the 24% bracket and the shortfall is $2,000. At $400,000, the stock crosses into the 32% bracket and the shortfall is $7,140. At $600,000, the whole vest is taxed at 35%. That makes the tax $35,000 against the same $22,000 withheld, a $13,000 shortfall.
- Withheld at 22%
- Federal tax owed on the vest
| Withheld at 22% | Federal tax owed on the vest | |
|---|---|---|
| $250,000 of other wages | $22,000 | $24,000 |
| $400,000 of other wages | $22,000 | $29,140 |
| $600,000 of other wages | $22,000 | $35,000 |
The $22,000 withheld stays flat while the tax owed rises with the income underneath the vest.
Computed from Rev. Proc. 2025-32 2026 joint-filer brackets, $32,200 standard deduction, $100,000 vest
The inputs, so you can redo it
| Other wages | Taxable income before vest | Taxable income after vest | Top bracket | Tax owed on vest | Withheld | Shortfall |
|---|---|---|---|---|---|---|
| $250,000 | $217,800 | $317,800 | 24% | $24,000 | $22,000 | $2,000 |
| $400,000 | $367,800 | $467,800 | 32% | $29,140 | $22,000 | $7,140 |
| $600,000 | $567,800 | $667,800 | 35% | $35,000 | $22,000 | $13,000 |
Filing status matters a great deal. A single filer with $250,000 of other wages and the same $100,000 vest, using the $16,100 standard deduction, owes $34,330 on the vest. That is a $12,330 shortfall, because the 32% and 35% brackets start at much lower income for singles.
A gap is a bill, not always a penalty
A shortfall is due with the return. Whether it also triggers an underpayment penalty depends on the safe harbors. In general you owe estimated tax for 2026 only if you expect to owe at least $1,000 after withholding and credits, and your withholding and credits are expected to be less than the smaller of 90% of the 2026 tax or 100% of the 2025 tax. If your 2025 AGI was more than $150,000 ($75,000 if married filing separately), 110% replaces 100%.
So a household whose withholding already covers 110% of last year's total tax can have a four-figure balance due and still no penalty. The case to watch is a large vest in a year after a smaller tax bill. I would test both numbers before relying on the safe harbor, using the method in the estimated tax guide.
One rule helps late-year fixes. Tax withheld from wages is deemed paid in equal parts on each estimated-tax due date unless you can establish the dates it was actually withheld. A catch-up through payroll in November or December is therefore treated as if it had been paid all year. An estimated payment is credited only when you make it.
The paperwork says it that way. Here is what it means.
| What you read | What it means |
|---|---|
| Pay that is not regular wages. Bonuses and commissions are examples, and the list is not limited to them | |
| The employer withholds 22% of the vest, whatever your bracket | |
| The employer adds the vest to regular wages and withholds on the total | |
| Your W-4 cannot change the 37% rate on supplemental wages above $1 million | |
| A level of withholding and credits that decides whether an underpayment penalty applies | |
| The rate on the top slice of your income, which is where the vest lands |
Common mistakes
- Assuming that 22% withheld means the tax on the vest is paid, when the vest is taxed at your marginal rates.
- Estimating the shortfall from the vest alone and ignoring the other income it sits on top of, which sets the bracket.
- Waiting for the W-2 in January, when the only year-end levers (payroll withholding and estimated payments) are gone by then.
- Forgetting that a $1 million threshold applies to all supplemental wages in the year, including bonuses, not to the vest by itself.
- Counting on Form W-4 to change the rate on the vest. For supplemental wages above $1 million the 37% rate applies without regard to the W-4, and under the flat method the 22% is the rate.
- Treating an estimated payment as a substitute for withholding when the vest comes late in the year, since payroll withholding is credited evenly and a payment is credited when made.
The usual way versus doing it right
Trust the 22%
- Treat the 22% withheld as the tax on the vest
- Wait for the W-2 in January to see the damage
- Pay a late-year estimate and expect it to count all year
Project it first
- Stack the vest on your other income to find the real rate
- Test the safe harbor before changing anything
- Add W-4 withholding through payroll, which is credited evenly
What to do about it
Find the vest dates and values
List every vest remaining in 2026 with the share count and an estimated price. The income is the share count times the price on the vest date, so a price move changes the answer.
Project the 2026 tax
Build a full-year estimate with wages, the vest, other income and deductions, and compare it to total expected withholding. The difference is your shortfall.
Check the safe harbor
Compare expected withholding to 90% of 2026 tax and to 100% (110% if 2025 AGI exceeded $150,000) of 2025 tax. The smaller of the two is the target.
Add withholding through payroll
Give your employer a new Form W-4 asking for an extra dollar amount per pay period. Pub. 15 allows an employee to specify a dollar amount to withhold in addition to the regular amount, and a change can generally be made whenever you wish. Spread the shortfall across the paychecks that remain.
Or make an estimated payment
The last 2026 estimated payment is due January 15, 2027 (the earlier ones were April 15, June 15 and September 15). If you file by January 31, 2027 and pay the balance, you can skip the January payment.
Revisit after each vest
Rerun the projection once the real value is known, and adjust the withholding again if the stock price moved.
How much to withhold, with this example
Take the middle household, with a $7,140 shortfall. If six biweekly paychecks remain in the year, an extra $1,190 on each one covers it. Because withholding is treated as paid evenly, it is credited as though it had been paid across the whole year. The same shortfall paid by estimate would need a payment by January 15, 2027 and would be credited from that date.
The exact amount belongs in a projection, not a rule of thumb. The shortfall moves with the stock price, the other income, deductions, and your state. If the numbers are large, a short planning session before the next vest is worth more than a correction after it. See tax planning.
