Calculation Methodology & 2026 Tax Rates
How the calculator models marginal bracket stacking, 2026 IRS tax brackets, FICA payroll tax caps, and state supplemental withholding rates.
1. Marginal Stacking Model: Base Salary vs. RSU Vest
Rather than multiplying your RSU vest by a single flat percentage, the calculator treats your equity vest as an incremental income layer stacked on top of your annual base salary.
To isolate the federal income tax attributable to your RSUs, it calculates your progressive tax before and after the vest using the 2026 standard deduction ($15,700 for Single filers; $31,400 for Married Filing Jointly):
T_base = max(0, BaseSalary - StandardDeduction)T_total = max(0, BaseSalary + GrossVestValue - StandardDeduction)Tax_fed_vest = ProgressiveTax(T_total) - ProgressiveTax(T_base)Because this differential formula attributes lower tax brackets (10%, 12%, 22%, 24%) to your regular base salary first, it accurately captures how an RSU vest spans across the 32%, 35%, and 37% marginal brackets.
2. 2026 Federal Progressive Tax Brackets vs. IRC § 3402(g) Flat Withholding
Under Internal Revenue Code (IRC) § 3402(g) and Treasury Regulation § 31.3402(g)-1, Restricted Stock Units (RSUs) are statutory supplemental wages. Corporate brokerages withhold federal income tax at a flat 22.00% on cumulative annual supplemental wages up to $1,000,000, and 37.00% on cumulative supplemental wages exceeding $1,000,000.
| Marginal Tax Rate | Single Taxable Income | Married Filing Jointly Taxable Income | Spread vs. 22% Flat Withholding |
|---|---|---|---|
| 10% | $0 – $12,400 | $0 – $24,800 | -12% (Overwithheld) |
| 12% | $12,400 – $50,400 | $24,800 – $100,800 | -10% (Overwithheld) |
| 22% | $50,400 – $107,300 | $100,800 – $214,600 | 0% (Overwithheld) |
| 24% | $107,300 – $204,700 | $214,600 – $409,400 | +2% Underwithheld |
| 32% | $204,700 – $260,050 | $409,400 – $520,100 | +10% Underwithheld |
| 35% | $260,050 – $650,600 | $520,100 – $781,650 | +13% Underwithheld |
| 37% | Over $650,600 | Over $781,650 | +15% Underwithheld |
3. 2026 FICA & Payroll Tax Boundary Logic
Payroll taxes under the Federal Insurance Contributions Act (FICA) apply to gross W-2 wages at vest without regard to standard or itemized deductions, governed by three statutory thresholds:
- 2026 Social Security Wage Base Cap ($184,500 at 6.20%): Our engine allocates your annual base salary against the $184,500 OASDI cap first:
RemainingSSCap = max(0, 184500 - min(BaseSalary, 184500)). If your base salary is $184,500 or higher, Social Security tax on your RSU vest is exactly $0.00. - Base Medicare Hospital Insurance Tax (1.45% Uncapped): Applies to 100% of gross RSU vest value with no statutory ceiling.
- Additional Medicare Surtax (0.90% above $200k / $250k): Under IRC § 3101(b)(2), an additional 0.90% tax applies to combined W-2 compensation exceeding $200,000 (Single) or $250,000 (Married Filing Jointly), bringing total marginal FICA on high-earner equity vests to 2.35%.
4. State Supplemental Withholding & Progressive Modeling
For progressive high-tax states (California, New York, and Massachusetts), the engine models marginal bracket stacking across state thresholds rather than assuming state flat withholding equals true liability:
| State | Statutory Supplemental Rate | Top Marginal Rate | Bracket Structure & Surtaxes |
|---|---|---|---|
| California (CA) | 10.23% | 13.30% | 9 progressive brackets from 1.0% to 12.3%, plus a 1.0% Mental Health Services surtax over $1,000,000 (13.3% top income rate) and 1.1% uncapped SDI payroll tax. |
| New York (NY) | 11.70% | 10.90% | Progressive state brackets up to 10.9% (6.85% for $215,400–$1,077,550; 9.65% up to $5M), plus 3.078%–3.876% New York City local resident income tax. |
| Washington (WA) | 0.00% | 0.00% | 0.00% personal wage income tax; 0.58% uncapped WA Cares payroll assessment (unless exempt); 7.0% excise tax on net long-term capital gains above the statutory threshold (~$270,000). |
| Texas (TX) | 0.00% | 0.00% | 0.00% state personal income tax and 0.00% state capital gains tax. |
| Florida (FL) | 0.00% | 0.00% | 0.00% state individual income tax across all wage and capital gain tiers. |
| Massachusetts (MA) | 5.00% | 9.00% | 5.0% flat rate on earned wages and long-term capital gains; 9.0% total rate on taxable income over ~$1,000,000; 8.5% on short-term capital gains. |
| Colorado (CO) | 4.40% | 4.40% | 4.40% flat state income tax rate across all income brackets. |
| North Carolina (NC) | 4.50% | 4.50% | Flat state income tax structure (~4.25%–4.50%) with no municipal or local wage taxes. |
| Illinois (IL) | 4.95% | 4.95% | 4.95% flat state income tax rate; 0% local city wage tax in Chicago. |
| Virginia (VA) | 5.75% | 5.75% | 4 brackets (2.0%, 3.0%, 5.0%) reaching the top 5.75% marginal rate on all taxable income above $17,000. |
5. Incremental Share Liquidation & Safe-Harbor Equations
To prevent IRS underpayment interest penalties under IRC § 6654, the engine computes both your net April tax shortfall and the exact integer number of retained RSU shares you must sell on the vest settlement date to fully fund your tax reserve:
Shortfall = max(0, TotalTrueLiability - TotalStatutoryWithheld)Shares_STC = ceil(TotalStatutoryWithheld / FMV)Shares_Extra = ceil(Shortfall / FMV)Shares_Kept = max(0, TotalVestShares - Shares_STC - Shares_Extra)