The Planning Corner: Understanding RSUs and Tax Withholding

Oct 15 2026 | Back to Blog List

VIDEO TRANSCRIPT:

David Ernst: I'm David Ernst, partner at Cedar Point Capital Partners, here with our director of financial planning, Nick Timm. Today, we're talking about restricted stock units, or RSUs, and the tax gap most people don't see coming.

Nick, let's talk about the basics. What is the process of an RSU from grant to vest?

Nick Timm: So, at grant, that's when the company promises you shares in the future. You don't own them yet, so it's not taxed. At vesting, that's when the shares become yours, and that's when they're taxed at ordinary income rates.

David: So, shares get withheld automatically for taxes at vest. Does that cover it?

Nick: Partly. Most companies will withhold at a 22% rate, which may be different than your own federal rate. If you were in 32% or 35% [tax brackets], there may be a gap there that doesn't show up until you file.

David: How big a gap are we talking about?

Nick: On $50,000, 22% withholding would be about $11,000. At a 35% tax bracket, that's $17,500 that may be due. So, there's a $6,500 gap that you may not have budgeted for.

David: So, what should someone actually do?

Nick: Check what was actually withheld versus what your actual rate would be, and do that sooner rather than later. Don't wait until it's time to file to look at it.

David: If you've had RSUs vest this year, it's important to check what was withheld against your tax bracket before year end, not after you file. If you'd like help fitting equity compensation into your broader financial plan, you can learn more and start the conversation at cedarpointcap.com.

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