Start by identifying the kind of award
This guide covers an employee’s straightforward publicly traded, stock-settled RSU where vesting and share delivery occur together, no amount is paid for the shares and no special tax deferral applies. It does not treat an RSU as a stock option or assume every equity award has the same timing. Read the award and release documents before applying the example.
Deferred settlement, private-company double-trigger awards, section 83(i) elections, cross-border service and unusual restrictions can change the analysis. Grant, vest and settlement are distinct events, even if an employer interface groups them together. When those dates differ, get the actual income inclusion and basis information from the plan administrator rather than applying a generic vest-date rule. IRS Publication 525 discusses special equity-grant deferrals separately. IRS Publication 525 (2025).
Source: IRS Publication 525 (2025)
Wage income and a stock sale answer different questions
In the simple case, the value of stock received for services is compensation included in wages. The IRS’s underreporter guidance explicitly describes RSU stock value as ordinary income reported on Form W-2. That wage inclusion is not limited to the shares left in your account after withholding.
A later sale asks how much the sold shares changed in value from their basis. IRS Publication 551 explains that property received for services generally has basis equal to the value included in income. This is why the same compensation should not become a second full capital gain merely because a broker statement has incomplete basis information.
Withholding is another layer. Shares may be sold, or shares may be withheld, to satisfy payroll deductions. An actual broker sale to cover withholding has proceeds and a sold lot. Net share withholding can be structurally different. Use the release statement, trade confirmations and year-end broker reporting to determine what occurred; do not invent a sale solely because fewer shares reached the account. IRS Internal Revenue Manual 4.19.3. IRS Publication 551, Basis of Assets (December 2025).
Sources: IRS Internal Revenue Manual 4.19.3 · IRS Publication 551, Basis of Assets (December 2025)
Worked example: 100 shares, 30 sold, 70 retained
Worked example
Assume 100 RSUs settle into shares at a $50 per-share compensation value, all included in the employee’s wages. Compensation is $5,000. Assume the broker sells 30 shares immediately at $50, with no fees, and $1,500 is remitted for withholding. The employee retains 70 shares. The chosen 30% funding amount is an example assumption, not a statutory combined withholding rate.
The sold 30 shares have $1,500 of proceeds and $1,500 of basis: 30 multiplied by $50. Their capital gain is zero under these exact assumptions. The retained 70 shares carry $3,500 of basis: 70 multiplied by $50. The $5,000 total basis is allocated between the sold and retained lots; it is not deducted in full against the 30-share sale.
Suppose the remaining 70 shares are later sold for $60 each with no fees. Proceeds are $4,200 and basis is $3,500, producing a $700 gain. The $5,000 wage inclusion remains part of compensation. The capital-gain holding period and the household’s other gains and losses determine how that $700 enters the return. This example does not calculate the employee’s total income tax.
Real sell-to-cover prices and fees can produce a small gain or loss. Do not force the result to zero merely because the sale occurred near vesting. Follow the actual transaction and avoid subtracting fees twice if the proceeds shown already reflect them. IRS Publication 551, Basis of Assets (December 2025). IRS Form 8949 instructions (2025).
Sources: IRS Publication 551, Basis of Assets (December 2025) · IRS Form 8949 instructions (2025)
Collect the documents that explain the numbers
Keep the award release statement, employer compensation detail, payroll statement for the event, Form W-2, broker Form 1099-B and any supplemental adjusted-basis statement. Record the lot, share count, acquisition and sale dates, compensation value, proceeds and basis. A screenshot of the account’s present value cannot reconstruct an earlier lot reliably.
Reconcile gross released shares to shares sold or withheld and shares retained. Then reconcile compensation to the employer’s wage records. Finally, compare each actual sale with the broker’s reporting category and basis information. A correct wage total does not prove the stock sale was entered correctly, and a trade confirmation does not prove the W-2 is correct.
If multiple vesting lots were sold together, preserve the lot-level breakdown rather than dividing a year’s total compensation by whichever share count appears on a single sale. Stock splits, transfers and corporate actions can require additional adjustments. If documents disagree, ask the administrator what the figures mean before filing. IRS Publication 551, Basis of Assets (December 2025). IRS Form 8949 instructions (2025).
Sources: IRS Publication 551, Basis of Assets (December 2025) · IRS Form 8949 instructions (2025)
Correct the sale rather than deleting legitimate wages
Do not remove wage compensation from the W-2 to compensate for a basis problem on the sale. Those are separate records. Check whether the 1099-B basis was reported to the IRS and whether it is correct. The Form 8949 instructions prescribe different treatment for a missing basis and an incorrect reported basis.
When basis reported to the IRS is incorrect, the instructions explain reporting the broker amount and making a basis adjustment using the appropriate code and adjustment column. If basis was not reported to the IRS, the instructions explain entering the correct basis. Follow the applicable category and your software’s precise prompts. A supplemental statement may supply the adjusted basis even when the 1099-B does not.
A blanket instruction to replace every basis with the total vest value is unsafe. So is assuming every broker statement is wrong. Match the source amount to the particular shares sold, retain the evidence, and inspect the resulting gain or loss. The worked example’s 30-share sale uses $1,500 of basis, not $5,000 and not the retained shares’ $3,500. IRS Form 8949 instructions (2025).
A sell-to-cover amount is not final tax clearance
Scope and limits
The proceeds used for withholding can differ from final annual liability. Federal income tax, payroll taxes and state or local deductions may all be involved. Selling enough shares to meet payroll’s withholding instructions does not guarantee a refund or a zero balance on the return. Review the whole year’s income and payments if equity compensation is material.
Afterax’s capital-gains tool can explore a gain you have already calculated from verified proceeds and basis. It does not calculate RSU compensation, determine a lot’s basis, import brokerage documents or resolve wash sales and special equity timing. The bonus tool illustrates incremental federal tax and withholding concepts, not your plan’s share-sale mechanics. Final 2025 is the product default; 2026 remains a labeled planning estimate.
Common questions
I never sold my retained shares. Is there still a sale to report?
An actual broker sell-to-cover can be a reportable sale even when you kept the remainder. Net share withholding can differ; inspect the documents.
Should I use the total award value as basis for a partial sale?
Allocate basis to the shares actually sold. In the example, 30 of 100 shares use $1,500 of the $5,000 total basis.
Are RSUs the same as incentive stock options?
No. Options and RSUs have different structures and can have different tax rules. This guide’s simple RSU example should not be used for an ISO exercise.
Sources
Primary references checked October 24, 2026.
- IRS Publication 525 (2025)IRS · Qualified Equity Grants; Restricted Property · accessed 2026-10-24
- IRS Internal Revenue Manual 4.19.3IRS · Wages analysis; restricted stock units reported as ordinary income · accessed 2026-10-24
- IRS Publication 551, Basis of Assets (December 2025)IRS · Property received for services; stocks and bonds · accessed 2026-10-24
- IRS Form 8949 instructions (2025)IRS · Column (e); adjustments to basis; code B and incorrect basis example · accessed 2026-10-24
Next steps
Model a verified capital gain
Estimate federal tax on net short or long term gains, with qualified dividends stacked.
Understand withholding versus liability
See how flat supplemental withholding compares with incremental federal tax on wage income.
Read about gains and NIIT
Read how preferential rates and the 3.8% NIIT layer onto investment gains.