A Quick Guide to RSU Tax Rates in Washington
When it comes to understanding your compensation package, it’s crucial to know just how much makes it to your pocket. Restricted stock units (RSUs) are a great form of compensation when you work for major tech giants like Amazon, Microsoft, Google, and Meta, but you must understand how these benefits affect your taxable income.
What can you expect from the RSU tax rate in Washington, where Amazon and Microsoft are headquartered? And more importantly, how might the new capital gains tax in Washington state affect those RSU tax rates?
Read on for everything you need to know.
RSU Tax Rates in Washington
The first and most significant aspect of taxation on RSUs in Washington state is the new capital gains tax.
In a nutshell, the capital gains tax is a 7% tax on gains realized from the sale of long-term assets (held longer than one year) of $1 million or less. Taxable capital gains exceeding $1 million are subject to an additional 2.9% tax, which brings the total to 9.9%.
This Washington-specific tax is in addition to the 15% or 20% capital gains tax that most people will pay to the federal government, and the 3.8% Net Investment Income Tax (NIIT) that is payable if you make over $250k and are married filing jointly, or $200k as single and head of household.
Who must pay the tax?
Don’t worry: not everyone is subject to paying this tax on capital gains like RSUs!
For one, there’s a standard deduction of $278,000 for 2025. This number is adjusted annually at the end of the year, so the rate for 2026 has not yet been announced.
Secondly, this threshold only applies to gains, not sales. In other words, you could sell $750k in vested RSUs but only realize $100k in gains. That $100k in gains is comfortably below the $278k standard deduction, so you wouldn’t have to pay the new Washington capital gains tax.
Finally, there are a lot of exceptions! Retirement accounts and real estate sales, for example, are exempt from the tax. You can read a full list of exemptions in our full blog on Washington State’s new Capital Gains Tax.
In essence, you only pay this 7% Washington state capital gains tax on the money earned above and beyond this $278,000 mark. The higher 9.9% rate only applies to the portion of your profit that exceeds $1,278,000 (your $278k deduction + the first $1m of taxable gains at 7%).
RSU Tax Rate Examples
Let’s take a closer look at how these numbers work in practice.
Example 1:
You sell $300k of Amazon RSUs and realize a $100k long-term capital gain. You will not pay the additional 7% tax to Washington state (but you will still pay tax at the federal level).
Example 2:
You sell $500k of Microsoft RSUs, which realizes a $300k long-term capital gain. You will pay an additional 7% tax on $22k.
The first $278k of long-term capital gains is taxed only at the federal level.
The remaining $22k is taxed at the federal level and at 7% by Washington state.
Example 3:
You sell a large tranche of stocks from several tech companies, realizing an incredible $2,000,000 long-term capital gain. Keep in mind that you’ll still owe federal taxes at every level of this scenario.
The first $278,000 is exempt from Washington’s capital gains tax.
The next $1,000,000 of gain is taxed at 7% (resulting in $70,000 tax).
The remaining $722,000 (the amount over $1.278m) is taxed at the higher 9.9% rate (resulting in ~$71,478 tax).
Added together, you would owe about $141,478 in taxes paid to WA.
Federal Taxes for 2026
RSUs are typically taxed as income when they vest. For many states, that means those RSUs would be subject to both state and federal income tax.
But as Washington residents know, there’s actually no state income tax in Washington. This means that when your RSUs vest, you’ll only owe RSU income taxes to the federal government.
For the 2026 tax year, you will fall into one of these seven federal income tax brackets.
2026 Tax Brackets: Single Filers
| Tax Rate | Taxable Income Bracket | Tax Owed |
|---|---|---|
| 10% | $0 to $12,400 | 10% of taxable income |
| 12% | $12,401 to $50,400 | $1,240 + 12% of amount over $12,400 |
| 22% | $50,401 to $105,700 | $5,800 + 22% of amount over $50,400 |
| 24% | $105,701 to $201,775 | $17,966 + 24% of amount over $105,700 |
| 32% | $201,776 to $256,225 | $41,024 + 32% of amount over $201,775 |
| 35% | $256,226 to $640,600 | $58,448 + 35% of amount over $256,225 |
| 37% | Over $640,600 | $192,979.25 + 37% of amount over $640,600 |
2026 Tax Brackets: Married Filing Jointly
| Tax Rate | Taxable Income Bracket | Tax Owed |
|---|---|---|
| 10% | $0 to $24,800 | 10% of taxable income |
| 12% | $24,801 to $100,800 | $2,480 + 12% of amount over $24,800 |
| 22% | $100,801 to $211,400 | $11,600 + 22% of amount over $100,800 |
| 24% | $211,401 to $403,550 | $35,932 + 24% of amount over $211,400 |
| 32% | $403,551 to $512,450 | $82,048 + 32% of amount over $403,550 |
| 35% | $512,451 to $768,700 | $116,896 + 35% of amount over $512,450 |
| 37% | Over $768,700 | $206,583.50 + 37% of amount over $768,700 |
How Does the Washington Tax Rate Affect Remote Workers?
Generally speaking, your tax rate is based on the state where you perform the work. This means if you live in Washington state, you are subject to this tax on stock sales that you’ve held for more than 12 months (long-term capital gains).
However, if you work for Amazon, Microsoft, Meta, or Google but live outside of Washington, you will be taxed based on your home state’s tax rates. Be sure to consult an accountant to make sure you are up to speed on what your home state requires.
When Are Taxes Due?
Remember, your RSUs have no taxable value until they officially vest, which usually happens over 2-4 years. Some companies grant a certain percentage of their RSUs in the first year, the second year, and so on. Microsoft’s vesting schedule, for example, vests over the course of five years at a rate of 20% per year. Until they officially vest, you do not have any tax liability for your RSUs.
You do have a few options for handling this. Generally speaking, the default is to “sell-to-cover,” which means you’ll sell a portion of your vesting shares to pay for the federal income tax due at vest.
Do you typically have a large tax bill owed when you file for taxes? This is likely because your default sell-to-cover is set to 22% federal taxes. If you earn a high income, this is nowhere near enough tax, which is why you owe so much when you file each year. Most companies allow you to adjust this withholding amount. Contact your HR or stock plan department to find out how to change this if you’re unsure (or ask us).
A financial planner with Consilio Wealth Advisors can help you make the most of this income and keep taxes to a minimum, and help you understand how your stock compensation fits into your planning picture.
Tips for Reducing Your RSU Tax Rate in Washington
If you want to minimize what you owe to the government from your RSUs vesting, there are a few things you can do. Here are our top four tips to reduce taxes on RSU income.
1. Adjust Tax Withholding
Instead of opting for the standard 22% federal tax withholding rate, you may choose to bump your withholding up to cover the cost. Your company may sell more of your RSUs and take the cash from those shares to help cover the cost of your federal tax bill.
2. Sell Stock ASAP
One of the best ways to eliminate your capital gains taxes is to sell your shares immediately – as in, the very same day that they vest. There will not be any time for them to lose or gain value, thus negating the need for capital gains tax. That said, the optimal time to sell your RSUs can depend on your goals and portfolio. Sometimes it makes more sense to hold, plan for the tax, and enjoy bigger gains down the road.
3. Tax Deductions
One way to make the most of your RSU income is to maximize tax-deductible accounts. For example, you may want to contribute the maximum amount to a pre-tax 401(k), an account that allows you to contribute up to $24,500 per person annually (for 2026). Tech companies like Microsoft, Amazon, Meta, and Google offer 401(k)s that you can max out first.
Another alternative is to invest in a health savings account (HSA). An HSA allows you to max out pre-tax deductions with a high-deductible health insurance plan and allows you to take tax-free distributions for medical expenses.
4. Charitable Giving
Many people like to feel that they are doing their part for a better tomorrow. Why not donate some of your income to an organization that you can support? You can either donate shares directly to a charity of your choice or donate to a donor-advised fund. Consult with Consilio to learn more about which option may be the right fit for your generosity.
Get Expert Guidance on Managing RSU Taxes
Tax laws can be extremely complex. But when RSUs are a significant part of your compensation package, you could be missing out on a huge portion of what you’ve worked hard to earn!
Expert advice can help you make the most of your RSUs and still remain compliant with government taxation at the end of the year. At Consilio Wealth Advisors, we specialize in helping tech professionals like you make the most of your compensation and benefits, win the tax game, and set yourself up to achieve your life goals.
For more on managing your RSUs and reducing taxes, check out our free downloadable guides and cheat sheets.
Ready to dive into crafting your strategy? Contact us today to learn more about how we can maximize your earnings from RSUs!
DISCLOSURES:
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information contained above is for illustrative purposes only.
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
All investments include a risk of loss that clients should be prepared to bear. The principal risks of CWA strategies are disclosed in the publicly available Form ADV Part 2A.
