I sold some RSUs once they were vested. I see in the Merrill Lynch statement that a certain amount of shares were taken out to cover the taxes. The federal tax is taken @ 25%.

Now, when I calculate my tax return, my final tax bracket is one step below 25% due to the 401k and other tax-deductible savings. My question is: will the Federal tax on the vested RSUs remain at 25% or they can/should be adjusted to the final tax bracket? (I see that in 1040, the capital gains/loss is only a relative number with respect to the cost basis. The amount reported in W-2 doesn't show up! So, it looks like the initial 25% tax-rate holds true throughout the 1040 form.)

Additional info: Cost basis is reported by Merrill Lynch. RSU vesting is reported in W-2.

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will the Federal tax on the vested RSUs remain at 25% or they can/should be adjusted to the final tax bracket?

They will remain at 25%. Taxes on bonuses and other non-recurring income will always be withheld at a single rate, because there's no way to predict what your actual tax bracket will be. With periodic income, they can extrapolate that out to your annual income and be more specific with the amount that is withheld.

If your final tax bracket is less than 25%, it means more was withheld than was necessary, and you will get the extra amount back either in a larger refund or a smaller tax bill (depending on your other withholdings).

I see that in 1040, the capital gains/loss is only a relative number with respect to the cost basis. The amount reported in W-2 doesn't show up!

Correct. In addition to the tax withheld for the RSU (which is considered income) you also need to account for any gain or loss as capital gain/loss.

  • I think it's worth clarifying that the 25% of shares held back from the RSUs is not so much the tax owed as the withholding in anticipation of taxes owed. This seems to be the standard withholding amount for vested RSUs, and you will report it as part of the "Taxes Paid" portion of your tax form. – Rick Goldstein Apr 12 at 21:28
  • @RickGoldstein Good point. I've edited to clarify that. – D Stanley Apr 12 at 21:29
  • Thanks @DStanley and @RickGoldstein! Specially the comment clarified my original concern. – KAZI Apr 14 at 13:35

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