RSU Offset on Your Paystub: What It Means and What It Hides

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

An RSU offset on your paystub is a deduction that removes the value of vested shares from your net pay, because you received those shares in your brokerage account rather than as cash. Payroll first adds the vest value to your gross pay so it can be taxed as wages, then subtracts it again as the “RSU offset” (or “stock offset” or “award offset”). The result: your taxable wages go up, but your paycheck cash stays roughly the same.

That is the whole mechanism. What matters for a household earning $750,000 or more is what the offset hides: the tax withheld on the vest is usually far below the tax actually owed, and the gap shows up in April.

Why the RSU income and the offset appear on the same paystub

Restricted stock units are taxed as wages when the shares are delivered to you at vest (IRS Publication 525; an RSU is only a promise to deliver shares, so it is not property until delivery under Treas. Reg. 1.83-3(e)). Your employer has to report that value on your W-2 and withhold federal income tax, Social Security, Medicare and state tax on it, just as it does on salary. The only practical way to do that is to run the vest through payroll.

So the paystub for a vest period usually has three kinds of lines:

• An earnings line such as “RSU income”, “RSU vest” or “GSU”. This is the number of shares that vested times the share price on the vest date.
• Tax lines that are larger than usual, because they now include tax on the vest.
• A deduction line such as “RSU offset”, “stock offset” or “award offset”. This takes the share value back out, because you were paid in shares, not cash.

Labels vary by employer and payroll system. At Alphabet, for example, awards settle in Class C shares, which is why some employees search for a “Class C offset” line. The logic is the same: income in, taxes out, share value offset.

Worked example: a $50,000 vest for a California family

Assumptions (illustrative): a married couple in the Bay Area filing jointly, combined W-2 income of $900,000 in 2026. One spouse works at a biotech company with RSUs vesting $50,000 per quarter. By the November vest this spouse’s wages from this employer have passed the 2026 Social Security wage base of $184,500 and the $200,000 point at which the employer must withhold Additional Medicare Tax. The vest is paid as a separate supplemental payment, the employer uses the 22% federal flat rate and California’s 10.23% flat rate, and it withholds shares to cover taxes (“sell to cover” or “withhold to cover”).

200 shares vest at $250 = $50,000.

To cover $17,940 of tax, the plan withheld 72 whole shares ($18,000), because shares are usually withheld in whole units. The $60 left over comes back as cash. That small leftover may be what people are seeing when they search for “RSU partial offset” or notice a few extra dollars in a vest paycheck.

Some payroll systems show it differently: the offset equals the full $50,000, and a separate credit line for the withheld shares pays the tax lines. The net effect on your cash is the same. If your net pay dropped by roughly the tax on the vest instead, check with payroll; it can mean the tax was taken from your salary rather than from shares.

The real issue: 22% withholding against a 37% bracket

For 2026, the 37% federal bracket starts at $768,700 of taxable income for joint filers (Rev. Proc. 2025-32). This family’s last dollars of income, including the November vest, are taxed at 37%. The employer withheld 22%, which is the optional flat rate for supplemental wages (IRS Publication 15). The difference is 15 points.

• Federal shortfall on one vest: $50,000 x 15% = $7,500.
• Federal shortfall on four vests in the year: about $28,000, not the full $30,000 (4 x $7,500). Assuming the 2026 standard deduction of $32,200, taxable income is $867,800, so only the top $99,100 falls in the 37% bracket and the rest of the $200,000 of vests falls in the 35% bracket. The vests add about $71,982 of federal tax against $44,000 withheld.
• California: the employer withheld 10.23%, the EDD’s flat rate for bonuses and stock options, which an employer may use when supplemental wages are not paid at the same time as regular wages; if they are paid together, the EDD requires the regular withholding schedules instead, so your withholding may differ (EDD Publication DE 44). For 2025, California’s 10.3% bracket covers joint taxable income from $742,958 to $891,542, and 11.3% applies above that (FTB 2025 rate schedules; 2026 schedules were not yet published). At this income the state gap is small. Above about $891,000 of taxable income, or above $1,000,000 where the extra 1% Behavioral Health Services Tax applies, it grows.

Only once one employer pays you more than $1,000,000 of supplemental wages in a calendar year does federal withholding jump to a mandatory 37% on the excess. Many families in this income range do not reach that, so for them the 22% gap is the typical case.

The offset line makes this easy to miss. Your cash looks fine, the shares landed, and nothing on the stub says “you still owe $28,000.”

How the same vest looks in Washington

Washington has no wage income tax in 2026 (WA Department of Revenue), so there is no state income tax line and no SDI. You will typically see a WA Cares Fund premium of 0.58% on the vest ($290 on $50,000), because that premium has no wage cap, unless you hold an approved WA Cares exemption (WA Cares Fund). The federal gap is identical: 22% withheld against a 37% bracket.

Two Washington-specific points for this income level. First, when you later sell the delivered shares at a long-term gain (held more than one year), Washington’s 7% capital gains tax can apply above the annual standard deduction ($278,000 for 2025, the latest published). Second, Washington has enacted a 9.9% income tax on AGI over $1,000,000 starting January 1, 2028. Vests in 2028 and later may look different on a Washington paystub once the Department of Revenue issues guidance.

Cost basis: covered, noncovered and the double-tax trap

The $50,000 counted in the example is already in your W-2. That means your cost basis in the 128 delivered shares is $250 each, the price at vest. If you sell them later for $260, your gain is $10 a share, not $260.

The problem is the Form 1099-B from the brokerage. It may show a basis of $0, a missing basis, or mark the shares as noncovered (box 5 checked). If you or your preparer enter the sale as reported, you can pay tax twice on the same $50,000. The Form 8949 instructions cover the fix: for noncovered shares with no basis shown, enter the correct basis directly; where a reported basis is wrong, use adjustment code B. Many equity plan administrators provide a supplemental statement with the vest-date value, which is the number you need.

What to decide after the vest

1. Close the withholding gap on purpose. Options include raising salary withholding on your W-4 for the rest of the year, making federal and California estimated payments after each vest, or, where the plan allows, electing a higher withholding rate on RSUs. The IRS penalty rules and safe harbors are in the Form 2210 instructions.
2. Decide whether to keep the delivered shares. Holding a vest is the same decision as buying your employer’s stock with $32,000 of cash. For a family whose salaries, bonuses and unvested RSUs already depend on one company, that is concentration on top of concentration.
3. Save the vest statement. Keep the date, share count, price and shares withheld for each vest. You need it for basis and for your return.

For more on the mechanics of share withholding, see withhold to cover vs sell to cover and sell to cover vs same-day sale. For the return itself, see how to report RSUs on your tax return.

Common mistakes with RSU offsets

• Treating the offset as money lost. It is not a fee or a clawback. It removes value you already received in shares.
• Assuming withholding equals tax. At a 35% or 37% federal bracket, 22% withholding usually leaves a balance due.
• Double counting at filing. Using a $0 basis from the 1099-B instead of the vest-date value.
• Forgetting the vests in the W-2 total. The W-2 already includes every vest. Adding them again on the return overstates income.

What to write down for your kids

A paystub with a $50,000 line that nets to $60 is a good lesson in how income and cash are different things. When you decide whether to hold or sell a vest, write a short note: what vested, what you did with it, and why. Your children will not remember the share price. They can learn from the reasoning. Conversations fade. Documentation compounds.

Frequently asked questions

Is the RSU offset taxed again?

No. The vest is taxed once, as wages, through the tax lines on the same paystub. The offset is a non-tax deduction that removes the share value from your cash pay. Tax only applies again when you sell the shares, and then only on any gain above the vest-date price, which is why getting the cost basis right matters.

What does stock offset mean on a pay stub?

It is the same thing as an RSU offset. Some employers call it “stock offset”, “award offset”, “GSU offset” or “Class C offset”. In each case, the line subtracts the value of shares delivered to you so that payroll does not also pay that amount in cash. Check your equity plan statement to match the offset to a specific vest.

Why is my W-2 so much higher than my salary?

Every RSU vest during the year is included in W-2 wages (box 1), even though it arrived as shares and was offset on your paystubs. For a family with $200,000 of annual vests, box 1 includes that $200,000 on top of salary and bonus (less any pre-tax deductions such as 401(k) deferrals). That is expected and does not need to be added again on your return.

If you want someone to check your withholding against your actual 2026 tax picture, including RSUs, a California or Washington return and your plans for the delivered shares, our tax management and investment risk management teams at Age Five Family Office™ can start with a Tax & Wealth Assessment.

This is general education, not individual tax advice. The right move depends on your family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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