How to File Taxes With RSUs: Step-by-Step Guide (2026)

Filing taxes when you have RSUs is confusing for one specific reason: your RSU income is already in your W-2, but your brokerage will also issue a Form 1099-B showing proceeds from sales of those shares. If you (or your tax software) don't connect those two documents correctly, you'll pay tax twice on the same income. This guide walks through exactly how to file correctly.

Step 1: Find your RSU income on your W-2

When your RSUs vest, your employer includes the fair market value of the vested shares in Box 1 (Wages, tips, other compensation) of your W-2 — the same box as your salary. Your RSU income is not separately broken out unless your employer chooses to note it in Box 14 (Other), which is optional and varies by employer.

What this means practically: you don't need to add RSU vest income to your return separately. It's already there. The total in Box 1 includes both your salary and the value of any shares that vested during the year.

To find the specific RSU vest amounts for each lot, log into your equity plan portal — usually Fidelity NetBenefits, E*TRADE at Work, Schwab Equity Awards, or Morgan Stanley at Work. Every vest event is recorded there with a date and the exact FMV per share at vest. You'll need these numbers when you get to Form 8949.

Step 2: Understand your 1099-B (and why it's probably wrong)

Your brokerage will issue a Form 1099-B for any shares sold during the year — including shares sold automatically in a sell-to-cover transaction at vest, and any shares you sold yourself later.

The 1099-B shows: proceeds from the sale (correct), the broker's reported cost basis (often wrong), and the holding period (may be wrong too).

Why the cost basis is often wrong: Brokerages are required to report the basis they have on file. For RSU shares, the basis is the FMV at vest — but how brokerages record this varies. You may see:

• $0 basis — the brokerage has no record of the vest price, treats your basis as zero. This is common for older grants or when shares transferred from an ESOP administrator.
• Partial basis — the brokerage shows only the net proceeds from the sell-to-cover transaction as basis, rather than the full FMV of all shares that vested.
• Correct basis — some brokerages (Fidelity, Schwab, Morgan Stanley) do track RSU vest prices and populate the basis correctly. Check anyway — human error in data entry still happens.

The IRS will receive both your 1099-B and your W-2. If you don't correct the basis discrepancy, the IRS may assume the capital gain is larger than it really is.

Step 3: Fix the cost basis on Form 8949

Form 8949 is where you report every sale of stock during the year. You'll fill out one row per transaction, or one row per lot if you sold multiple lots of the same stock on the same day. Here's how to handle the RSU cost basis adjustment:

Determining the correct cost basis

Your correct basis for RSU shares is the FMV per share at vest multiplied by the number of shares in that lot. This equals the amount already taxed as ordinary income.

Example: 50 shares vest when the stock price is $120/share. Your employer included $6,000 (50 × $120) in your W-2 income. Your basis in those 50 shares is $6,000. If you sold them for $6,800, your capital gain is $800 — not $6,800.

Filling out Form 8949

If the broker reported a different basis than what you calculated, use the adjustment columns:

• Column (e): Enter what your broker reported as cost basis (from the 1099-B).
• Column (f): Enter code B — this signals that the reported basis is incorrect.
• Column (g): Enter the adjustment amount. If the correct basis is higher than what was reported, enter a positive number (this reduces your taxable gain). If the correct basis is lower, enter a negative number.

Tax software (TurboTax, H&R Block, FreeTaxUSA) will walk you through these fields when you import your 1099-B. Look for a screen asking "Was the cost basis correct?" or "Did you receive a corrected 1099-B?" — that's where you make the adjustment. If using a CPA, give them your equity portal vest history so they can reconcile each lot.

Step 4: Determine the holding period (short-term vs. long-term)

The holding period for RSU shares starts at the vest date — not the grant date. This matters for whether your sale qualifies for long-term capital gains treatment:

• Sold within 1 year of vest: short-term capital gain, taxed at your ordinary income rate (10%–37% federal).
• Sold more than 1 year after vest: long-term capital gain, taxed at 0%, 15%, or 20% federal depending on your taxable income, plus 3.8% NIIT if your MAGI exceeds $200,000 single / $250,000 MFJ.³

For 2026, the 15% LTCG rate applies to taxable income between $49,450 and $545,500 (single filers) or $98,900 and $613,700 (MFJ). Above those thresholds the rate is 20%.² For a tech employee earning $400K total comp, most RSU gains will be taxed at 20% + 3.8% NIIT = 23.8% federal if held long-term, vs. 35–37% as short-term.

Your 1099-B will indicate whether each sale was short-term or long-term based on what the brokerage has on file. Check that the holding period matches your records — if the brokerage used the grant date instead of the vest date (less common but possible with transfers), you'll need to correct it.

Step 5: Sell-to-cover transactions

Most tech employers automatically sell a portion of vested shares to cover the withholding taxes owed at vest. These automatically-sold shares appear on your 1099-B as sales. They're almost always short-term (held for one day or less) and the capital gain or loss is typically tiny — the shares sold the same day they vested at a price nearly equal to the FMV at vest that forms your basis.

Don't skip these on Form 8949 just because they seem trivial. Each sell-to-cover transaction needs a row. The gain or loss is usually within a few dollars per share (reflecting intraday price movement), but omitting them can trigger an IRS notice asking why the 1099-B proceeds aren't on your return.

Step 6: Reporting multiple vests and lots

If your RSUs have a quarterly vest schedule (common at FAANG companies), you may have four or more vest events in a year, each creating a separate lot with its own FMV and cost basis. If you later sell shares, each lot you sell is a separate row on Form 8949.

If you hold shares from multiple vests and sell some of them, you can choose which specific lots to sell — this is called specific identification. By default, brokerages use FIFO (first in, first out), but you can instruct them to use specific lots before executing a sale. Choosing lots that are over 1 year old optimizes for long-term treatment; choosing lots with the highest basis minimizes the gain. Your brokerage's equity portal usually lets you designate specific lots before you place the sell order.

For detailed guidance on lot selection strategy, see the RSU Tax Planning guide and the Tax-Loss Harvesting guide.

Step 7: State taxes

State treatment of RSU income varies significantly and affects both the vest-year income and the eventual capital gain:

• California: Taxes RSU vest income as ordinary income (13.3% top rate) and taxes capital gains — including LTCG — at the same ordinary income rate. No preferential LTCG treatment. See the California equity tax guide.
• New York / NYC: No LTCG preference; the millionaires' surtax (9.65% state + 3.876% NYC) applies at $1M+ income. Nonresident sourcing rules apply if you worked in NY while the grants were earned. See the New York equity tax guide.
• Washington, Texas, Florida, Nevada, Tennessee: No state income tax on RSU vests (WA has a 7–9.9% capital gains income tax on net LTCG above $278K, but no income tax on vest-as-ordinary-income). See individual state guides.
• Other states: Most states with income taxes follow the federal treatment for ordinary income; LTCG treatment varies. See the Remote Work State Taxes guide for an overview.

If you worked in more than one state during the year — or moved states — your RSU income may need to be apportioned. California uses a grant-to-vest sourcing rule that follows employees even after they leave the state. New York uses a similar rule. This gets complex fast; if you relocated, work with a CPA familiar with nonresident equity sourcing.

Other forms you may need

• Form 3921 — required if you exercised incentive stock options (ISOs) during the year. Your employer sends you this by January 31. It doesn't create an immediate tax liability but feeds into your AMT calculation on Form 6251. See the Stock Options guide for ISO mechanics.
• Form 3922 — required if you acquired shares under an ESPP during the year. Used to calculate your basis when you eventually sell. See the ESPP guide.
• Form 6251 — Alternative Minimum Tax. If you exercised ISOs without immediately selling, the spread triggers an AMT preference item. Use the ISO AMT calculator to estimate exposure before filing.
• Form 8606 — if you made non-deductible (backdoor) IRA contributions. See the Backdoor Roth IRA guide.

Common mistakes checklist

• Not correcting the brokerage's basis. Tax software imports 1099-B data and may accept $0 basis without prompting you to fix it. Always compare the brokerage basis to your vest history.
• Using the grant date as the holding period start. The holding period starts at vest, not at grant. A 4-year cliff vest means you start the 1-year LTCG clock when you actually receive the shares, not when the grant was issued.
• Skipping sell-to-cover transactions. These appear on 1099-B and must be reported on Form 8949, even when the gain is small.
• Missing the 22% withholding gap. Your employer withholds 22% federal on supplemental income (unless your cumulative supplemental wages exceed $1M, at which point it's 37%). If your marginal rate is 35–37%, you owe additional tax. This doesn't affect the filing mechanics but means you may owe more than expected when your return settles. Setting aside additional cash at each vest event prevents surprise balances. See RSU after-tax calculator to estimate this gap.
• Ignoring partial-year state taxes. If you moved states during the year, each state claims a portion of your RSU income based on how much of the vest schedule was worked there. This is separate from where you lived when the shares vested.

Should you use a CPA or DIY?

If you have straightforward RSUs — quarterly vests at one employer, immediate sells, no interstate moves — tax software handles this reasonably well once you know to fix the basis. TurboTax Premier and H&R Block Deluxe both have screens for RSU transactions.

A CPA (especially one who works with tech employees) is worth the cost if:

• You have RSUs, ISOs, and ESPP in the same year — the interaction between the three is non-trivial.
• You worked in multiple states or relocated during the year.
• You had a high-vest year (IPO, large cliff vest) that pushed you into new brackets, IRMAA tiers, or NIIT territory.
• You're holding shares for long-term treatment and want to coordinate the timing of sales with your other income for the year.
• You have any ISO exercises — AMT planning is the most error-prone part of tech employee tax returns.

For the bigger financial picture — how RSU income flows into retirement planning, housing decisions, and career-move analysis — that's where a fee-only financial advisor who specializes in tech employees earns their fee. Tax filing and financial planning overlap but aren't the same thing.