Do RSUs get taxed twice? The simple answer, with real examples

Think of your shares walking through two doors. Each door has its own toll. The two tolls are for different things — you are not paying the same toll twice.

1. 1Door 1 — the shares land in your account (this is called "vesting"). The day they vest, they are worth something. The IRS treats that value just like salary, so you pay regular income tax on it. Your employer usually grabs that tax automatically — often around 30–40% once you add up federal, state, Social Security, and Medicare.
2. 2Door 2 — you sell the shares later. Now you only pay tax on the *growth* — how much the price went up *after* they vested. If the price never moved, there is no extra tax at all.

That is the whole rule. Door 1 taxes what the shares were worth when you got them. Door 2 taxes only what they gained after that. No single dollar gets taxed twice.

Say 100 shares vest at $50 each. That is $5,000 worth. You sell them the same day, still at $50.

• At vesting: that $5,000 counts as income. At a typical high earner’s rate (32% federal + 9.3% California + 1.45% Medicare), the tax is about $2,140.
• At the sale: the price did not move, so there is no growth. Tax on the sale: $0.
• Total: about $2,140 — paid once, because the price never changed. Not double.

Same 100 shares vest at $50 ($5,000). But this time you wait 18 months and sell at $80.

The first $5,000 was taxed as income. The $3,000 of growth was taxed as a gain. Two different things — never the same dollar twice.

Almost always, it comes down to one of these three things:

1. 1Your broker reports the wrong number — this is the big one. When you sell, your broker sends a form called a 1099-B. For RSUs, it often lists your "cost" as $0, as if the shares were free. They were not — you already paid income tax on them at vesting. If you leave that $0 in place, your tax software thinks your *entire* sale was profit and taxes all of it. THAT is real double tax. The good news: it is a mistake you can fix.
2. 2Both events land in the same year. If you vest and sell in the same year, your W-2 looks huge and it feels like the shares got counted twice. They did not — the W-2 has the vesting, the broker form has the sale. They are separate lines.
3. 3The withholding looks scary. Seeing 30–40% disappear at vesting makes people shout "double tax!" It is not — it is one tax, just held back at a high combined rate.

1. 1Find your vest value. Your December pay stub (or Workday / ADP) lists each "RSU vest." That dollar amount should already be baked into your W-2 wages.
2. 2Check the broker’s cost number. On your 1099-B, the cost for each RSU sale should equal what the shares were worth on the day they vested. If it says $0, that is the error — fix it on Form 8949.
3. 3Sanity-check the total. Income tax on the vest, plus a little gain tax on any growth, should roughly equal your total RSU tax for the year. If your bill looks way bigger, the $0-cost mistake is probably hiding in there.

• Getting the grant. When the company first promises you RSUs, nothing is taxed. The clock has not started.
• Holding shares after they vest. Just sitting on them? No tax. You only deal with tax again when you sell.
• Moving shares to your own brokerage account. Same owner, no sale, no tax.
• Donating shares to charity. Often a tax *win* — you can skip the gain tax entirely. (That is its own post.)

RSUs are taxed once — just in two pieces. Income tax when they vest, and a smaller gain tax later if the price went up. The "I am being double-taxed!"

panic is almost always that $0 cost on the broker form. Fix that one number and everything lines up.

Want to make sure enough tax is being held back so April does not bite? Run your numbers through the RSU Tax Shortfall calculator.

It is a lot easier to catch a problem in March than to discover it on April 15.