How Amazon RSUs Are Taxed at Vest and When You Sell

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

Amazon RSUs are taxed twice, in two different ways. When shares vest, their full market value is added to your W-2 as wages and taxed at your ordinary income rate, whether you sell or not. When you later sell, only the change in price since the vest date is taxed, as a short-term gain if you held one year or less and a long-term gain if you held more than one year.

For an Amazon household in Seattle or Bellevue earning $750,000 or more, the vest is usually the larger tax event, and the withholding at vest is usually too low. The sale matters mostly in two places: getting the cost basis right on your return, and deciding how much Amazon stock your family should keep holding.

What happens at an Amazon vest

An RSU is a promise to deliver shares later. It is not property for tax purposes until the shares are delivered (Treas. Reg. §1.83-3(e)), so the value is taxed as wages at delivery (IRS Pub. 525). On each vest date:

• The share value becomes wages. Shares times the price on the vest date is added to your W-2.
• Federal withholding is often a flat 22%. For 2026, employers may withhold 22% on supplemental wages, and must withhold 37% on supplemental wages above $1,000,000 in the calendar year (IRS Pub. 15). If your household is in the 35% or 37% bracket, 22% usually leaves a balance due.
• Payroll taxes apply. Medicare is 1.45% with no cap. The 0.9% Additional Medicare Tax applies to a married couple’s combined wages above $250,000 (filing jointly); your employer starts withholding it once it has paid you more than $200,000 in the year, so the amount withheld may not match what you owe (IRS). Social Security (6.2%) stops at the 2026 wage base of $184,500, which many Amazon employees pass early in the year.
• Shares are withheld or sold to cover the tax. The remaining shares land in your brokerage account with a cost basis equal to the vest-date value. See withhold to cover vs. sell to cover for how that works.

Amazon’s standard grants have commonly been back-loaded, with most of a new-hire grant vesting in years three and four. That means the tax bill tends to jump in year three, often at the same time as sign-on cash ends. Your grant agreement, not a rule of thumb, sets your actual schedule.

How Amazon shares are taxed when you sell

Your basis is the value already taxed at vest. When you sell:

• Held one year or less: any gain is short-term and taxed at ordinary rates (up to 37% for 2026), plus the 3.8% Net Investment Income Tax once modified AGI is above $250,000 married filing jointly.
• Held more than one year: any gain is long-term. For 2026, married couples pay 20% on long-term gains once taxable income is above $613,700, plus the 3.8% NIIT.
• Sold at a loss: if the price fell below the vest-date value, you have a capital loss, even though you paid wage tax on the higher value.
• Sold on the vest date: the gain or loss is close to zero, because the sale price is close to your basis.

Worked example: a Bellevue household with a year-three vest

Assumptions: married filing jointly, Washington residents, about $1.1 million of household W-2 income, so taxable income is above $768,700 and the top federal bracket of 37% applies for 2026. One Amazon vest of 1,000 shares at $220 ($220,000). Supplemental wages for the year stay under $1,000,000 and the employer uses the optional 22% flat rate. Household wages are already above $250,000, so the 0.9% Additional Medicare Tax applies to the whole vest. Prices are illustrative.

Now suppose the family later sells all 1,000 shares from this vest at $280, a $60,000 gain over the $220 vest-date value. (For simplicity, assume the tax at vest was paid in cash so no shares were withheld.)

In this example, waiting past one year lowers federal tax by $10,200. That saving is real, but it is smaller than what a 15% drop in the stock would cost on the full position. The holding period should not be the only reason to keep a concentrated position.

The same vest in California

Amazon employees in the Bay Area, Los Angeles or Irvine pay California tax on top of federal. Using 2025 California rates (2026 schedules are not yet published), a married couple filing jointly with California taxable income between $1,000,000 and $1,485,906 has a marginal rate of 12.3% (11.3% bracket plus the 1% Behavioral Health Services Tax on taxable income over $1,000,000) (FTB 2025 rate schedules). If the couple’s California taxable income is at least $1,000,000 before the vest and stays under $1,485,906 after it, the $220,000 vest adds about $27,060 of California income tax. At lower income, part of the vest falls in the 10.3% or 11.3% bracket without the extra 1%, and the tax is lower. SDI adds 1.3% for 2026 ($2,860 on this vest), with no wage cap (EDD).

When they sell, California taxes the $60,000 gain as ordinary income, about $7,380 at the same 12.3% marginal rate, whether they held one month or five years (FTB). Holding longer only changes the federal side.

Washington: what changes for high earners

Washington has no individual income tax in 2026, so the vest itself carries no state income tax. Two rules matter for Amazon families. First, Washington taxes long-term capital gains at 7% above the annual standard deduction, and 9.9% on taxable gains above $1,000,000 (WA DOR). It applies to long-term gains only. Selling a large block of long-held Amazon stock in one year can trigger it. Second, the 2026 Legislature passed a 9.9% income tax on AGI over $1,000,000 starting January 1, 2028 (WA DOR). How it will treat RSU wages is pending guidance, but households above $1 million may want to factor it into vests from 2028 on.

Getting the 1099-B right

Your broker sends a Form 1099-B for every sale, including shares sold to cover tax at vest. Brokers often report the basis of RSU shares as $0 or leave it blank, because the value was already taxed through payroll. If you file using that number, you pay tax on the same $220,000 twice. The fix is to report the correct basis (the vest-date value) on Form 8949 with an adjustment (Form 8949 instructions). Many brokers also provide a supplemental statement with the adjusted basis. Our guide on how to report RSUs on your tax return walks through it line by line.

Common mistakes

• Treating 22% withholding as the tax. At the 35% or 37% bracket it usually is not. Families typically close the gap by raising W-4 withholding or making estimated payments in vest quarters.
• Accepting a $0 basis. Check every RSU sale on the 1099-B against your vest records.
• Holding only to reach long-term rates. Ask whether you would buy this much Amazon stock today with cash. If not, the tax saving often does not justify the risk.
• Forgetting the year-three jump. Back-loaded vests can move a household into the 37% bracket and can push one employee’s supplemental wages above $1,000,000, where 37% withholding is mandatory.

What to write down for your kids

Amazon stock is often the largest single asset a Seattle family holds, and children usually see only the result: a house, a college fund. A one-page note on why you sold or kept shares, and how you chose a target percentage of net worth in one company, teaches more than the account balance. Conversations fade. Documentation compounds.

Frequently asked questions

Can I file an 83(b) election for Amazon RSUs?

No. An 83(b) election applies to restricted stock and early-exercised options, filed within 30 days of the transfer. RSUs are not property until the shares are delivered, so there is nothing to elect on (Treas. Reg. §1.83-3(e)). Amazon RSUs are taxed as wages when they vest and the shares are delivered, and no election changes that timing.

What is an 83(i) election, and does it apply to Amazon?

Section 83(i) lets some employees of eligible private companies defer tax on qualified stock from options or RSUs for up to five years (IRC §83(i)). It requires that no stock of the company was readily tradable on an established securities market in any earlier calendar year, so it does not apply to a public company like Amazon.

Does it matter which lot I sell first?

Yes. Each vest is its own lot with its own basis and holding period. Selecting specific lots (for example, the highest-basis shares, or lots held more than a year) can lower the tax on the same sale. Ask your broker to use specific identification before you place the trade, not after.

Next step: pull your vest schedule for the next 12 months and compare expected withholding with your bracket. If you want help setting a sell plan and a withholding fix, our tax management and investment risk management work at Age Five Family Office™ starts 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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