When Meta RSUs are taxed
Your RSUs are taxed when they vest. The value of the shares on that day counts as wages, whether you sell them or keep them.
That value also becomes your cost basis. For example, if 100 shares vest at $600, you have $60,000 of wage income and a basis of $600 per share. When you later sell, you’re only taxed on how much the price has changed since the vest. Holding for more than a year lowers the rate on that change, but it doesn’t reduce the tax on the vest itself. RSU taxes when you sell has examples.
Why you can still owe tax after shares were withheld
Withholding is only an estimate of your tax, and Meta’s default federal rate of 22% is often lower than your actual bracket.
Meta keeps some of your shares to pay the withholding, so you receive fewer shares than vested. Here’s a 100-share vest with federal withholding included:
100 RSUs vest
At $600 per share, that’s $60,000 of wage income.
22 shares withheld
At the default 22% federal rate, Meta keeps 22 shares, worth $13,200.
78 shares left
State and payroll taxes will reduce this further. Each share you receive has a basis of $600.
Federal income tax only. The rate is 37% on supplemental wages above $1 million in a year. Your paystub shows the actual amounts.
If that $60,000 lands in the 35% bracket, you owe $21,000 of federal tax on it but only $13,200 was withheld, which leaves you $7,800 short. That shortfall repeats with every quarterly vest, so it adds up. On $200,000 of RSUs in a year, it comes to $26,000. Your actual number depends on the rest of your income and deductions.
You can fix this by raising the federal withholding rate on your RSUs in Workday, which is what I’d do because it’s automatic once it’s set. You can go as high as 37%, and the change needs to be in at least a week before the vest. The other option is quarterly estimated payments. Before a large vest, it’s worth giving your tax preparer a recent paystub, what you expect to earn for the rest of the year, and last year’s return so they can estimate the gap.
Other things to know at Meta
- Dividend equivalents
- The cash dividend equivalents on your unvested RSUs are paid within 60 days after they vest. They’re taxed as wages and show up on your paystub and W-2, and they aren’t reported as dividends.
- Your cost basis
- The 1099-B you get after selling RSU shares often shows a cost basis that’s too low, which would mean paying tax twice on the same income. RSU taxes when you sell shows how to correct it.
- Moving states
- If you move out of California, the state still taxes part of the RSUs that vest afterward, based on where you worked between the grant and the vest. How RSUs are taxed when you move states has an example.
