How to Report RSUs on Your Tax Return: W-2, Box 14 and Form 8949

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

You report RSUs on your tax return in two places. The value of the shares on the day they vest is already included in your W-2 wages (Box 1, and in Boxes 3 and 5 for payroll tax), so you enter your W-2 as usual and do not add the RSU income a second time. When you later sell the shares, you report the sale on Form 8949 and Schedule D, using the vest-date value as your cost basis, which often means correcting the basis your broker shows on Form 1099-B.

Almost every RSU reporting error comes from one of three things: counting the vest income twice, accepting a zero or missing cost basis, or assuming that the tax withheld at vest was the tax owed. For a two-earner household in California or Washington with several hundred thousand dollars of RSUs a year, each of those can cost five or six figures.

Where RSU income shows up on your W-2

RSUs are not taxed when they are granted. An RSU is an unfunded, unsecured promise to deliver shares later, which the tax regulations do not treat as property until the shares are actually delivered (Treas. Reg. §1.83-3(e)). That is also why an 83(b) election is not available for RSUs; it applies to restricted stock, not RSUs. When the shares vest and are delivered to you, their fair market value is treated as wages, the same as salary or a bonus (IRS Pub 525). Your employer adds that value to your W-2:

• Box 1 (wages) includes the vest-date value of every RSU that vested during the year.
• Box 3 (Social Security wages) includes it up to the $184,500 wage base for 2026. Most families at this income hit that cap on salary alone, so RSUs usually add no Social Security tax.
• Box 5 (Medicare wages) includes all of it, because Medicare tax has no wage cap.
• Box 2 includes the federal tax withheld from the vest, usually by selling some of the shares (“sell to cover”).

So yes, RSUs are included in your W-2. If you have RSUs from a current employer, there is no separate tax form for the vest income itself. Box 12 code V is for the exercise of nonqualified stock options, not RSUs (2026 General Instructions for Forms W-2 and W-3).

What the RSU line in Box 14 means (and which category to pick)

Many employers also list RSU income in Box 14 (called Box 14a on 2026 W-2s) with a label such as “RSU” or “Restricted Stock”. The IRS instructions say employers may use this box “for any other information that you want to give to your employee” and must label each item. It is informational. The same dollars are already inside Box 1.

Tax software often asks you to pick a category for each Box 14 line. For an RSU line, the right answer is typically the “other” or “not on the list” option. Picking a category that treats it as a deduction or as extra income can distort the return. In California, you will also usually see a separate Box 14 line for SDI withheld, which does belong in its own category.

Forms 3922, 3921 and 1099-B: which ones apply to RSUs

Several searches on this topic mix up stock-plan forms. Here is what each one is for:

The IRS describes Form 3922 as the form corporations file for each transfer of stock acquired under an employee stock purchase plan described in section 423(c) (IRS, About Form 3922). If you work at a company like Apple or Gilead and receive both RSUs and ESPP shares, you may get a 3922 for the ESPP and nothing extra for the RSUs.

How to report the sale of RSU shares on Form 8949

Your cost basis in RSU shares is the value that was taxed as wages at vest. IRS Publication 551 says that when you receive property for services, “the amount you include in income becomes your basis” (IRS Pub 551). Your gain or loss on a later sale is the sale price minus that vest-date value.

Brokers do not always show that basis correctly on Form 1099-B. Stock-plan shares sometimes appear with a basis of $0, a blank basis, or a basis that ignores the income already on your W-2. The Form 8949 instructions cover this directly: if the basis shown on Form 1099-B is incorrect, enter code B in column (f). If the 1099-B says the basis was reported to the IRS (box A or D checked on Form 8949), enter the basis as shown and correct it with an adjustment in column (g). If the basis was not reported to the IRS (box B or E), enter the correct basis in column (e) and -0- in column (g) (2025 Instructions for Form 8949).

1. Download the 1099-B and the broker’s supplemental statement (often called a stock plan or “adjusted cost basis” statement).
2. For each lot sold, compare the 1099-B basis with the supplemental statement’s vest-date value.
3. If they match, report as shown. If they do not, use code B and follow the column (e) or (g) rule above.
4. Remember the sell-to-cover sales. They appear on the 1099-B too, usually with a small gain or loss because the shares were sold at or near the vest price.
5. Check the holding period. Shares held more than one year after vest generally produce long-term gain or loss; one year or less is short-term, taxed as ordinary income federally.

Worked example: a $1.05 million California household with RSUs

Assumptions (illustrative, 2026 federal figures, 2025 California brackets because 2026 California schedules are not yet published): married filing jointly, living in the Bay Area. One spouse earns a $300,000 salary plus $500,000 of RSUs that vest during 2026. The other is an employed physician earning $250,000. Total W-2 wages are $1,050,000. Both contribute $24,500 to their 401(k)s (the 2026 limit), and they take the $32,200 standard deduction for simplicity, so federal taxable income is about $968,800.

Step 1: the federal withholding gap

The employer withholds the optional 22% flat supplemental rate on the RSU vests, which is $110,000 (IRS Pub 15, 2026). But the RSU income sits at the top of this household’s income. For 2026, the 37% bracket for joint filers starts at $768,700 of taxable income, so about $200,100 of the RSU income is taxed at 37%, $256,250 at 35% (the full 35% bracket, which starts at $512,450) and the remaining $43,650 at 32%. That is roughly $178,000 of federal income tax on the RSUs, about $68,000 more than was withheld.

A smaller gap comes from the 0.9% Additional Medicare Tax. The couple owes it on wages above $250,000 (about $7,200), but each employer only withholds it on wages it pays above $200,000 (about $5,850 in total), leaving roughly $1,350 more to pay.

Step 2: California usually comes closer

California’s flat withholding rate for bonuses and stock options is 10.23% (EDD, California Employer’s Guide DE 44, 2026), or $51,150 on $500,000. Assuming California taxable income of about $1,000,000, the RSU layer runs through the 9.3%, 10.3% and 11.3% brackets (2025 schedule) for about $50,200 of California tax. In this case California withholding roughly covers it. Once California taxable income passes $1,000,000, the extra 1% Behavioral Health Services Tax applies, and the gap reopens. California also withholds 1.3% SDI on all wages for 2026 with no cap, which is $6,500 on these RSUs; that is a payroll tax, not an income tax credit.

Step 3: the basis trap on the sale

Suppose they later sell shares that were worth $300,000 at vest for $330,000, eight months after vest. The real gain is $30,000, short-term. If the 1099-B shows a $0 basis and the return is filed as shown, the return reports a $330,000 gain. The extra $300,000 would be taxed at 37% federal, plus the 3.8% Net Investment Income Tax (they are well above the $250,000 joint threshold), plus about 12.3% in California (the 11.3% bracket plus the 1% Behavioral Health Services Tax, because the extra gain pushes California taxable income over $1,000,000), for roughly $159,000 of tax on income that was already taxed on the W-2.

How the same RSUs are taxed in Washington

Put the same household in Seattle, with the RSUs from Amazon or Microsoft. Washington has no individual income tax for 2026 (WA DOR), so there is no state withholding or state tax on the $500,000 of vest income. The federal gap of about $68,000 is exactly the same. Employees who pay into WA Cares have 0.58% of all wages withheld, which is about $2,900 on these RSUs.

Two Washington rules still matter for RSU holders:

• Capital gains tax. Long-term gains on shares held more than a year after vest can be subject to Washington’s 7% capital gains tax above the standard deduction ($278,000 for 2025, the latest published amount), and 9.9% on taxable gains above $1,000,000 (WA DOR capital gains tax). The vest income itself is wages, not a capital gain.
• A new income tax from 2028. Washington enacted a 9.9% tax on individuals and joint filers with AGI over $1,000,000, effective January 1, 2028 (WA DOR income tax FAQ). For households with large, steady RSU vests, “no state income tax” is a 2026 and 2027 fact, not a permanent one.

The decision to make each year: withholding or estimates

Once you see the gap, you have to decide how to cover it before April. For most W-2 families, the simplest options are:

• Raise withholding on salary with a new W-4. Federal withholding is generally treated as paid evenly through the year, even if it is increased in the fall (IRS Pub 505).
• Ask whether your plan allows a higher RSU withholding rate. Some plans let you elect more than 22%; many do not.
• Make quarterly estimated payments. If your 2025 AGI was over $150,000, you generally avoid the underpayment penalty by paying at least 110% of your 2025 tax through withholding and estimates (IRS Pub 505), even if you still owe a balance in April.

The planning question underneath is concentration. Selling shares at vest adds almost no extra tax, because the basis equals the vest price. Holding them is an investment decision to own more of your employer’s stock. Our investment risk management work usually starts there.

Common RSU reporting mistakes

• Adding the Box 14 RSU amount to wages again.
• Accepting a $0 basis on the 1099-B instead of using the supplemental statement.
• Forgetting that sell-to-cover shares were sold and must appear on Form 8949.
• Treating 22% federal withholding as the final bill. At the 35% and 37% brackets it rarely is.
• Assuming Form 3922 relates to RSUs. It covers ESPP shares only.
• Filing before the corrected 1099-B or supplemental statement arrives.

What to write down for the family

Each spring, record four things in one short note: how much vested, what was withheld, the size of the gap you paid, and what you decided to do with the shares and why. A child who later inherits a brokerage account full of old RSU lots will need the basis records. More than that, they will need to understand why you sold, held or gave shares away. As Kevin Luu puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.” Our family governance work is built around records like this.

Frequently asked questions

Do I report RSUs if I did not sell any shares?

Yes, but only through your W-2. The vest-date value is already in Box 1, so you enter the W-2 normally. If your employer sold shares to cover withholding, you will also receive a 1099-B for those sales and should report them on Form 8949, usually with a very small gain or loss. Unsold shares have no capital gain to report until you sell. See also whether you pay tax on a brokerage account if you do not sell.

Why is my RSU income counted in MAGI?

Because it is wages. RSU income raises your AGI and modified AGI the same way salary does, which affects items such as the Net Investment Income Tax threshold, Roth IRA eligibility and the SALT cap phase-down. For households at this income, RSUs are often what push MAGI past these limits. Here is where MAGI appears on Form 1040.

Does moving between California and Washington change how RSUs are taxed?

The federal treatment does not change. State treatment can: California may tax part of RSU income earned while you worked in California even if the shares vest after you move. The allocation depends on your work history between grant and vest, so a move is worth reviewing with your tax preparer before it happens, not after.

Next step

Before your next vest, pull last year’s W-2, 1099-B and supplemental statement and check two numbers: the basis on every lot you sold, and the gap between what was withheld and what you owed. If you want help with that review, our tax management team can walk through it as part of 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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