PSU Performance Stock Units Tax Calculator 2026
Calculate federal, state, and FICA taxes on Performance Stock Unit vesting. Model performance multipliers from 0β200%, identify withholding gaps, and compare PSU vs RSU tax outcomes.
Number of shares at 100% performance achievement
%
0% (miss) to 200% (max). 100% = target payout. $
Fair market value on the vesting/settlement date $
Base salary and other W-2 wages this year %
CA: 9.3%+, NY: 6.85%, TX/WA/FL: 0% Actual shares withheld. Leave 0 to auto-calculate at 22%.
$0
Vested PSU Value (W-2 Income)
$0
Total Estimated Tax
$0
Withheld (22% flat)
$0
Withholding Gap
PSU Tax Breakdown
| Component | Calculation | Amount |
|---|
How PSU Taxes Are Calculated
PSUs vest based on performance achievement over a measurement period (typically 3 years). When they settle, the IRS treats the vested value (shares Γ FMV) as ordinary W-2 income under IRC Β§83. The employer withholds at the 22% supplemental rate β but this is almost never enough for high-income employees whose marginal rate may be 32% or higher.
The Formula
Shares Vested = Target Shares Γ Performance Multiplier %
Vested Value = Shares Vested Γ FMV at Vesting
Federal Tax = Marginal Rate applied to (Other Income + Vested Value) over standard deduction
SS Tax = max(0, min(Total Income, $184,500) β min(Other Income, $184,500)) Γ 6.2%
Medicare = Vested Value Γ 1.45% + Additional Medicare if applicable
Withholding Gap = Total Tax β Employer Withheld (at 22% flat)
Vested Value = Shares Vested Γ FMV at Vesting
Federal Tax = Marginal Rate applied to (Other Income + Vested Value) over standard deduction
SS Tax = max(0, min(Total Income, $184,500) β min(Other Income, $184,500)) Γ 6.2%
Medicare = Vested Value Γ 1.45% + Additional Medicare if applicable
Withholding Gap = Total Tax β Employer Withheld (at 22% flat)
Sources and References (click to expand)
- IRC Β§83 β Property transferred in connection with performance of services (PSU/RSU taxation)
- IRC Β§3402(g) β Supplemental wage withholding rates (22% / 37% over $1M)
- IRS Publication 525 β Stock options, RSUs, and equity compensation taxation
- Rev. Rul. 2002-22 β Transfer of nonstatutory stock options, compensation timing rules
- ASC 718 β FASB Accounting for Stock-Based Compensation (performance award accounting)
Extended
Multi-Year PSU Grant Scenario Calculator
Model multiple PSU grants with different performance assumptions. Bar chart of vested value by year. PSU vs RSU comparison table.
Model up to 4 PSU grant cycles with different performance multipliers. Compare PSU outcomes vs equivalent RSU grants.
| Grant Year | Target Shares | Multiplier | Vested Shares | FMV | Vested Value | PSU Tax (est.) | RSU Value (100%) |
|---|
Frequently Asked Questions
How are Performance Stock Units (PSUs) taxed?
PSUs are taxed exactly like RSUs β as ordinary W-2 income at the time of vesting. The number of shares that vest depends on performance against pre-set metrics (TSR percentile, EPS growth, revenue growth, etc.). When the performance period ends and shares vest, the fair market value of the vested shares (target shares Γ performance multiplier Γ FMV) is added to your W-2 and taxed at ordinary income rates, plus FICA taxes. There is no ISO or qualified plan treatment available for PSUs.
What is a performance multiplier and how does it affect PSU value?
The performance multiplier scales the number of shares you actually receive based on achieved performance. Common structures: 0% for missing threshold (no payout), 50% for threshold performance, 100% for target, 150β200% for maximum. For example, with a 500-share target grant and a 150% multiplier, you receive 750 shares. The full FMV of all 750 shares on the vesting date is W-2 income. Multipliers are set by the board and disclosed in proxy statements β typically 0% to 200% of target.
Why is the supplemental withholding rate of 22% often insufficient for PSUs?
Employers are required by IRS regulations to withhold on supplemental wage payments (bonuses, RSUs, PSUs) at a flat 22% rate (37% for amounts over $1 million). However, the actual marginal tax rate for many PSU recipients β particularly senior executives and high earners β is 32% or 35%+. The gap between the 22% withholding and the actual marginal rate creates a large underpayment that must be settled at filing. For large PSU vesting events, this gap can easily exceed $50,000β$200,000.
What is the difference between a PSU and an RSU?
RSUs (Restricted Stock Units) vest on a fixed time schedule β typically 4 years with cliff or quarterly vesting β with no performance condition. You receive exactly the number of shares granted, subject only to continued employment. PSUs introduce a performance condition: the number of shares actually delivered can range from 0% to 200% (or more) of the target grant, depending on how the company performs against metrics over a 2β3 year performance period. Both are taxed the same way at vesting as ordinary W-2 income.
Are PSUs subject to FICA (Social Security and Medicare) taxes?
Yes. PSU vesting income is subject to Social Security tax (6.2%) up to the wage base ($184,500 in 2026) and Medicare tax (1.45% on all wages), plus the 0.9% Additional Medicare Tax on wages above $200,000 (single) or $250,000 (married filing jointly). The FICA taxes apply on the full FMV of vested shares on the vesting date, just like salary or bonus income. Unlike RSU grants, PSU grants themselves do not create any tax obligation β only vesting does.