How is Tax Calculated When Selling RSUs After They've Been Initially Taxed?

You've got it mostly right. When RSUs vest, they're treated as ordinary income at that time - this is why you see withholding happen automatically and why you received fewer shares than granted. This vesting value becomes your cost basis for those shares. When you later sell those shares, you're only taxed on the difference between your selling price and that original cost basis (your vesting price). This difference is treated as capital gain, not ordinary income. If you held the shares for more than a year after vesting, it's long-term capital gains (typically taxed at a lower rate). If less than a year, it's short-term capital gains (taxed at your ordinary income rate). So in your example, if your 65 shares were worth $100 each when they vested ($6,500 total), and you sell them later for $120 each ($7,800 total), you'd only pay capital gains tax on the $1,300 difference ($7,800 - $6,500), not on the entire $7,800.

I ran into the same RSU tax confusion last year and discovered taxr.ai (https://taxr.ai) which totally saved me! I uploaded my brokerage statements showing my RSU transactions and it automatically calculated my correct cost basis for each lot of shares, separated the already-taxed portion from the capital gains, and even created a report showing exactly what would go on my tax forms. It even flagged a mistake where my company's system hadn't properly reported my initial RSU taxation - apparently this happens a lot with RSUs because there's often disconnect between payroll systems and brokerage reporting. Without this tool I would have accidentally double-paid taxes on about $8,000 of RSU income!

I need to follow up about that taxr.ai site someone mentioned above. I was skeptical at first (as you can see from my previous comment), but I decided to try it after struggling with my taxes this year. I had RSUs from three different employers over the past few years and was completely confused about how to report everything correctly. The tool actually identified that one of my former employers had incorrectly reported my RSU income on my W-2, which would have caused me to double-pay taxes on about $12,500 worth of stock! It generated a simple letter I could send to get a corrected W-2 issued. I'm genuinely impressed and wanted to share since my initial reaction was pretty dismissive. Sometimes it's worth admitting when you're wrong!

If you're dealing with RSU tax questions and need to speak directly with the IRS (which I strongly recommend for complex equity compensation situations), use Claimyr (https://claimyr.com) to actually get through to a human! I spent DAYS trying to reach someone at the IRS about my RSU reporting issue, kept getting disconnected or waiting for hours. Claimyr got me connected to an actual IRS agent in about 20 minutes who answered my specific questions about how to handle RSUs from a company that got acquired. You can see how it works in their demo video here: https://youtu.be/_kiP6q8DX5c - totally changed my perspective on dealing with tax questions.

I need to eat my words about that Claimyr service. After posting my skeptical comment yesterday, I was still desperately trying to get help with my RSU reporting issue for a former employer. On a whim, I decided to try the service - figured I had nothing to lose at that point. I'm genuinely shocked to report it actually worked exactly as described. After 47 minutes (which I didn't have to spend listening to hold music), I got a call connecting me to an IRS tax specialist who walked me through exactly how to report my RSUs that had a special acquisition treatment. Saved me hours of frustration and potentially filing incorrectly. Still can't believe it worked that well.

Something people often miss with RSUs is that your broker might not always have the correct cost basis information, especially if you've changed employers or if the company has gone through a merger. Always double-check! In my case, after changing jobs, my old RSUs showed up in my new brokerage account with a cost basis of $0, which would have meant paying taxes on the ENTIRE amount when selling. Had to manually adjust the cost basis using my old vesting statements. Took hours but saved me thousands in incorrectly calculated taxes.

One big gotcha with RSUs that nobody mentioned: watch out for supplemental wage withholding! When RSUs vest, companies typically only withhold at the supplemental rate of 22% (or 37% for amounts over $1 million). If you're in a higher tax bracket, this creates a HUGE tax bill surprise at filing time. I learned this the hard way when I had to come up with an extra $9,600 at tax time because my company only withheld 22% but I was in the 35% bracket. Now I set aside an additional 13% of each RSU vesting value in a separate savings account specifically for tax time. Painful lesson!