Tax on RSU

Nuage Networks / Eng
NoDrama

Go to company page Nuage Networks Eng

PRE
Apple
NoDrama
Jan 16 17 Comments

My fidelity account shows that I’ll be taxed at 40.9% when my RSU vest? Does this make sense? I thought these should be taxed at our normal income tax. Can someone please help me understand?

TC: 290k

#tax

comments

Want to comment? LOG IN or SIGN UP
TOP 17 Comments
  • This comment was deleted by original commenter.

  • Google
    👁️♥️🚀

    Go to company page Google

    👁️♥️🚀
    It will be taxed at the marginal rate above your reported annual salary, so while your salary might be taxed at a lower rate because it's taxed at an average of the lowest brackets, your RSUs will be taxed at the brackets above that.

    So let's say you make $150k base plus get $100k in RSUs and the tax rates are 0% for the first $25k, 10% for the next $50k, 25% for the next $75k, and 40% for everything above that. Your base salary will have an effective tax rate of 15.8% (($0+$5k+18.75k)/$150k) while the RSUs will be taxed at 40%.

    If your base income went up to, say, $200k, that extra $50k would be taxed at 40% as well, but your effective tax rate on your base would be 21.9% (($0k+$5k+$18.75k+$20k)/$200k). The RSUs would still be taxed at 40%.
    Jan 16 2
    • Quantum / Eng
      82f3be36

      Quantum Eng

      82f3be36
      The important thing here Is that you get a refund for the difference after you file. You don’t actually pay any “extra” except as an interest free loan to Uncle Sam.
      Jan 16
    • Google
      👁️♥️🚀

      Go to company page Google

      👁️♥️🚀
      Yeah, if you get $10k in deductions in my example you'll get $4k in refunds at the end of the year.

      My example was pretty simplistic. While in reality your actual effective tax rate is smeared across the year (if it wasn't you'd have huge paychecks in January and small ones in December), things like payroll tax are paid as you go up to the payroll tax limit and then your paychecks get larger.
      Jan 16
  • Nuage Networks / Eng
    NoDrama

    Go to company page Nuage Networks Eng

    PRE
    Apple
    NoDrama
    OP
    This seems like a lot of Tax. Are there any ways for saving tax other than maximizing 401k and HSA?
    Jan 16 6
  • New
    CTiz63

    New

    CTiz63
    Withholding rate is higher on bonuses and RSUs so that you’re covered if it bumps you up to the next tax bracket. When you file you get the cash refund if you’re overpaid.
    Jan 16 1
    • Quantum / Eng
      82f3be36

      Quantum Eng

      82f3be36
      This is not how tax brackets work.
      Jan 16
  • When you file it will be income tax rate. It will come almost this rate
    Jan 16 0