What’s Your Cost Basis on RSUs at Vesting? (w/Examples) + FAQs

Quick Answer

Your RSU cost basis is the fair market value (FMV) of the shares on the day they vest — the same amount your employer already added to your W-2 as ordinary income. For tax year 2025, that per-share vesting price becomes your basis when you later sell. Use it to avoid being taxed twice.

This article reflects federal tax rules as of June 2026 and covers tax year 2025 (the 2026 filing season). State conformity is addressed separately below. Tax law changes — confirm current figures before you file.

When your restricted stock units vest, the company hands you real shares, and the value of those shares on that exact day is treated as wages. You pay ordinary income tax on it right then, usually through withholding. That same value is your cost basis going forward — yet the form your broker sends often shows your basis as $0, which sets a trap that quietly costs people thousands of extra dollars.

This matters most in the weeks you file. According to a LinkedIn analysis by a CPA candidate, reviewed returns showed this single basis error caused some filers to overpay by $3,000 to $12,000 in one year. If you vested RSUs in 2024 or 2025 and sold any shares, you are exactly the person this guide is written for.

💰 How your exact cost basis is set on the day your RSUs vest (and why it equals your W-2 income).
⚠️ The “$0 basis” trap on Form 1099-B that triggers double taxation — and the one-line fix.
🧮 Fully worked dollar examples for a sale at vest, a later sale, and a sell-to-cover.
📅 How your holding period and short-term vs. long-term capital gains start the moment you vest.
🛠️ The exact Form 8949 adjustment (Code B) and the steps to correct your basis before you file.

What “Cost Basis” Means for RSUs

Cost basis is simply what the IRS treats as your investment in the shares — the number you subtract from your sale price to figure your gain or loss. For most investments, basis is what you paid. With RSUs, you did not pay cash for the shares, so the rule works a little differently, and that difference is where confusion begins.

When restricted stock units vest, the IRS treats the vesting-day value as wages. Your employer includes the fair market value of the vested shares in Box 1 of your W-2, and it also flows into Social Security and Medicare wages. Because you already paid ordinary income tax on that value, the tax system “credits” you with it as your basis. In plain terms: you were taxed on it once as income, so it becomes the cost you are allowed to recover tax-free when you sell.

So your RSU cost basis equals the number of shares vested × the fair market value per share on the vesting date. As Schwab explains for restricted stock, that vesting-day value is both the income you report and the basis you keep. The consequence of forgetting this is direct: if you sell and use a $0 basis, you pay capital gains tax on money the IRS already taxed as wages.

Here is a quick misconception to clear up. Many people think RSUs are taxed when granted. They are not — a grant is only a promise. Tax (and your basis) is set at vesting, not at grant. The next step for you is simple: find the per-share price on each vesting date, because that single number drives everything that follows.

How Your Basis Is Set on the Vesting Date

The mechanics are cleaner than they feel. On the day a tranche of your RSUs vests, the company values the shares at the market price that day, multiplies by the number of shares, and reports the total as compensation. That total is taxed as ordinary income, and that same total becomes your aggregate cost basis for those shares.

The vesting-day FMV is the anchor

The fair market value used is almost always the closing price (or sometimes the average of the high and low) on the vesting date, depending on your plan. As one advisory firm puts it, once your RSUs vest, your cost basis becomes the stock price on that day, and your holding period starts then. If 100 shares vest at $50, your income is $5,000 and your basis is $5,000 — a per-share basis of $50. Miss this anchor and your gain calculation is wrong from the start, which is the most common reason people overpay.

Withholding does not change your basis

When shares vest, your employer must withhold taxes. Under the IRS supplemental wage rules in Publication 15-T, the federal rate is a flat 22% for supplemental wages up to $1 million in a year, rising to 37% on amounts above $1 million. FICA of 7.65% (up to the wage base) and any state tax also apply. A common trap: that 22% often under-withholds high earners whose marginal rate is higher, leaving a balance due at filing — but withholding itself never reduces your cost basis.

Each vesting lot has its own basis

If your RSUs vest in tranches — say quarterly — each tranche is a separate “lot” with its own vesting-day price and its own holding-period clock. You cannot blend them into one average unless you choose an averaging method that applies to RSUs (generally you cannot for individual stock). The consequence of ignoring lots is mismatched gains: selling an old lot and reporting a new lot’s basis distorts your tax. Keep a simple log of each vest date, share count, and price.

The $0 Basis Trap That Causes Double Taxation

Here is the heart of the problem and the reason “(w/Examples)” belongs in the title. When you sell vested RSU shares, your broker sends you a Form 1099-B. That form very often reports your cost basis as $0 — or leaves it blank — even though your true basis is the vesting-day value you already paid income tax on.

This happens because of a reporting rule. For shares acquired through equity compensation, brokers are generally not required to report the compensation portion of basis to the IRS. As the rally.tax breakdown of the $0 basis trap explains, the 1099-B shows the proceeds but omits the basis you earned at vesting. If you (or your tax software) enter the form exactly as printed, you report a giant fake gain and pay capital gains tax on income that was already taxed as wages.

The fix is one adjustment. On Form 8949, you correct the basis using adjustment Code B in column (f). Per the IRS Form 8949 code instructions, you enter the (wrong) basis from the 1099-B in column (e), then enter the difference as a negative number in column (g) when the correct basis is higher. That negative adjustment shrinks your taxable gain down to only the true post-vesting appreciation.

A common misconception is that “the broker’s number must be right.” It is not wrong — it is incomplete on purpose. Your real basis usually lives on a supplemental statement from the broker (E*Trade, Schwab, Fidelity, Morgan Stanley), separate from the official 1099-B. Your next step: pull that supplemental stock-plan statement and use its adjusted basis, not the bare 1099-B figure.

Worked Examples With Real Dollar Figures

Numbers make this stick. Each example below uses tax year 2025 and walks the math line by line so you can copy it for your own shares.

Example 1 — Selling immediately at vest (Maya)

Maya works in software. On March 3, 2025, 100 RSUs vest at a fair market value of $50 per share.

Vesting income added to her W-2: 100 × $50 = $5,000 (taxed as ordinary income).
Her cost basis in the 100 shares: $5,000 ($50 per share).
She sells all 100 shares the same day at $50: proceeds = $5,000.
Capital gain = $5,000 proceeds − $5,000 basis = $0.

Maya owes no capital gains tax on the sale because she sold at her basis. But if her 1099-B shows $0 basis, the form implies a $5,000 gain, and she would wrongly pay capital gains tax on $5,000 she already paid income tax on. Her fix: report $5,000 proceeds and use Code B to correct basis to $5,000, producing the true $0 gain.

Example 2 — Holding then selling later (David)

David’s 200 RSUs vest on January 15, 2025, at $40 per share.

W-2 income at vest: 200 × $40 = $8,000; cost basis = $8,000.
He holds the shares and sells all 200 on July 1, 2026, at $65 per share: proceeds = $13,000.
Capital gain = $13,000 − $8,000 = $5,000.
He held longer than one year from vesting, so the $5,000 is a long-term capital gain, taxed at 0%, 15%, or 20% depending on income.

If David’s 1099-B shows $0 basis, it implies a $13,000 gain instead of $5,000. Using Code B, he enters the $0 from the form, adjusts by −$8,000 in column (g), and reports the correct $5,000 long-term gain — saving tax on $8,000 of phantom gain.

Example 3 — Sell-to-cover withholding (Priya)

Priya’s 100 RSUs vest on June 2, 2025, at $80 per share.

W-2 income at vest: 100 × $80 = $8,000; total basis = $8,000 ($80 per share).
Her company uses sell-to-cover: it sells 24 shares to cover the 22% federal withholding plus FICA and state, leaving her 76 shares.
The 24 sold shares have a basis of 24 × $80 = $1,920 and were sold at about $80, so the gain on those is roughly $0 (a few dollars from price movement during settlement).
Her remaining 76 shares keep an $80 per-share basis ($6,080 total) and a holding-period start of June 2, 2025.

The takeaway: sell-to-cover does not lower your per-share basis. Each of the 76 shares still carries an $80 basis. When Priya later sells them, she compares the sale price to $80 — not to $0.

Which Situation Applies to You?

The right next step depends on what you did with your shares. Find your row and jump to the matching section above.

You sold shares the same day they vested (or within days): Your gain should be near $0. Watch hardest for the $0-basis trap — see Example 1 and the Form 8949 fix.
You sold shares more than a year after vesting: You have a long-term capital gain on appreciation only. See Example 2 and the holding-period rules below.
You sold within a year of vesting: Your appreciation is a short-term gain, taxed at ordinary rates. Use your vesting-day basis, not $0.
Your company did sell-to-cover and you still hold the rest: No tax on shares you still own; basis on remaining shares is the vesting-day price. See Example 3.
You have not sold anything yet: You already owe income tax at vest, but there is no capital gain or 8949 entry until you sell. Just record each lot’s date, shares, and price now.

Holding Period: Short-Term vs. Long-Term

Your holding period for capital gains starts on the vesting date, not the grant date. This is one of the most misunderstood RSU rules, and getting it wrong changes your tax rate.

If you sell more than one year after vesting, your gain on appreciation qualifies for preferential long-term capital gains rates of 0%, 15%, or 20%. If you sell within one year of vesting, that gain is short-term and taxed at your ordinary income rate, which can be far higher. The consequence is real money: selling a few days early can move a gain from 15% to as high as 37%.

A widespread misconception, flagged by Wealthspire, is that holding RSUs a year makes the whole value long-term. It does not. You were already taxed on the vesting value as wages; only the gain since vesting can be long-term. Your next step: check each lot’s vesting date before selling, and if you are close to the one-year mark, weigh waiting.

When You Sell After Vesting	How the Gain Is Taxed
Same day or within 1 year	Short-term capital gain at ordinary rates (up to 37% for 2025)
More than 1 year later	Long-term capital gain at 0%, 15%, or 20% for 2025

Federal vs. State: Does Your State Tax This?

Start with the federal rule, then check your state — because states do not always follow federal treatment, and guessing misleads you.

Federally, RSU vesting value is ordinary wage income, and any later gain is a capital gain, as described above. There is no separate federal “RSU tax”; it rides on the wage and capital-gains rules already in place for tax year 2025.

At the state level, most states with an income tax also treat vesting value as wages, so your basis logic carries over. But the rate and treatment of capital gains vary widely. High-tax states like California tax capital gains as ordinary income at rates up to 13.3%, while no-income-tax states like Texas, Florida, Washington, and Nevada impose no state tax on the wage or the gain. If you vested in one state and moved to another before selling, multiple states may claim a piece — a “trailing tax” situation worth a professional’s review. Your next step: confirm your state’s capital-gains treatment with your state Department of Revenue before you file.

Mistakes to Avoid

Each error below has a specific cost. Skip these and you keep more of your money.

Entering the 1099-B basis as-is when it shows $0. You pay capital gains tax on income already taxed as wages — often thousands of dollars overpaid.
Using the grant date for your holding period. You may report a long-term gain that is actually short-term, triggering IRS notices and back tax.
Assuming the 22% withholding covered your full tax. High earners are under-withheld and owe a surprise balance, plus possible underpayment penalties.
Blending separate vesting lots into one basis. Mismatched gains distort your return and can flag an audit.
Ignoring the supplemental broker statement. You miss the only document with your correct adjusted basis.
Forgetting state tax on the gain. A move between states can leave income unreported in the state that taxed the vest.
Thinking RSUs are taxed at grant. You may misreport income timing and basis for the wrong year.
Selling days before the one-year mark by accident. You convert a 15% gain into an ordinary-rate gain.

Do’s and Don’ts

Do record each vest date, share count, and FMV per share — why: it is the basis you will need years later.
Do pull your broker’s supplemental stock-plan statement — why: it holds the correct adjusted basis the 1099-B omits.
Do use Form 8949 Code B to fix a wrong basis — why: it is the IRS-approved way to stop double taxation.
Do check your holding period before selling — why: one day can change your rate from 37% to 15%.
Do set aside extra cash if you are a high earner — why: 22% withholding often under-covers your real tax.
Don’t trust a $0 basis on your 1099-B — why: it is incomplete by design and inflates your gain.
Don’t treat withholding as your final tax bill — why: you may still owe at filing.
Don’t mix grant date and vest date — why: only the vest date sets basis and starts the clock.
Don’t assume your state mirrors federal rules — why: capital-gains treatment varies a lot.
Don’t delete your old vesting records — why: you need them whenever you finally sell.

Pros and Cons of RSUs at Vesting

Pro: Your basis equals taxable income, so there is no extra tax if you sell at vest — why: it prevents a second layer of tax on the same value.
Pro: A clean, known basis makes future gain math simple — why: you only track appreciation after vesting.
Pro: Holding past one year unlocks lower long-term rates on the gain — why: 0–20% beats ordinary rates.
Pro: Sell-to-cover handles withholding automatically — why: you do not need cash on hand to pay the tax.
Pro: Vesting income builds Social Security wage credits — why: it counts toward your earnings record.
Con: The 1099-B $0 basis trap is easy to miss — why: it causes silent double taxation.
Con: Flat 22% withholding often under-withholds high earners — why: you face a surprise balance due.
Con: You owe tax at vest even if you do not sell — why: a falling stock can leave you taxed on value you no longer have.
Con: Concentrated company stock raises risk — why: too much of your wealth rides on one employer.
Con: Multi-state moves complicate the tax — why: more than one state may tax the same shares.

What to Do Next

Take these steps in order before you file for tax year 2025.

Gather every vesting confirmation showing date, shares, and FMV per share for each lot.
Download your broker’s supplemental stock-plan statement — not just the 1099-B.
Compare the 1099-B basis to your true vesting-day basis; flag any $0 or blank entries.
On Form 8949, enter proceeds and the reported basis, then use Code B in column (f) and the correction in column (g).
Carry totals to Schedule D, and confirm short-term vs. long-term using each vest date.
If you had a multi-state move, large vests over $1 million, or many lots, call a CPA or tax professional — this is the point where professional help (often $300–$800 for a return with equity comp) pays for itself.

This article is educational and not a substitute for advice from a licensed tax professional for your specific situation. If you are mid-filing and unsure how to enter an adjustment, a [Form 8949 walkthrough guide] and a CPA can confirm the math before you submit.

Frequently Asked Questions

What is my cost basis on RSUs?

Your cost basis is the fair market value per share on the vesting date, multiplied by the number of shares. For tax year 2025, that equals the income already added to your W-2, so you are not taxed on it twice.

Why does my 1099-B show $0 cost basis for RSUs?

Because brokers are generally not required to report the compensation portion of basis. The 1099-B shows your sale proceeds but omits the vesting-day value. You must correct it using Form 8949 Code B to avoid double tax.

Are RSUs taxed twice?

No, not if you report basis correctly. RSUs are taxed once as wages at vesting. They are only taxed “twice” by mistake when a $0-basis 1099-B is entered without adjusting the basis.

When does my RSU holding period start?

On the vesting date. Hold the shares more than one year from that date for long-term capital gains treatment; sell within a year and the gain is short-term at ordinary rates for 2025.

How much tax is withheld when RSUs vest?

A flat 22% federal rate for supplemental wages up to $1 million in 2025, rising to 37% above $1 million, plus 7.65% FICA and any state tax. High earners are often under-withheld.

Do I owe tax even if I don’t sell my vested RSUs?

Yes. Vesting itself triggers ordinary income tax, reported on your W-2. You owe that tax whether or not you sell, because the shares were delivered to you with value.

Where do I report RSU sales on my tax return?

On Form 8949 and Schedule D. Enter the sale proceeds and basis, apply any Code B adjustment for an incorrect 1099-B basis, then total the gains or losses on Schedule D.

What is the correct adjustment code for a wrong RSU basis?

Code B. Per the 2025 Form 8949 instructions, enter the reported basis in column (e), then the basis correction as a negative number in column (g) when your true basis is higher.

Does sell-to-cover change my cost basis?

No. Sell-to-cover only sells some shares to pay withholding. Your remaining shares keep their vesting-day per-share basis and the original vesting-date holding period.

Is the gain on RSUs after vesting taxed at capital-gains rates?

Yes, only the appreciation after the vesting date. Gain on shares held over one year is long-term (0%, 15%, or 20% for 2025); held a year or less, it is short-term at ordinary rates.

Where do I find my correct RSU basis?

On your broker’s supplemental stock-plan statement. Companies like Schwab, Fidelity, E*Trade, and Morgan Stanley provide an adjusted-basis document separate from the official 1099-B.

Does my state tax RSU gains?

It depends on your state. Most income-tax states tax the vesting value as wages; capital-gains rates vary, and no-income-tax states like Texas and Florida tax neither. Confirm with your state Department of Revenue.

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