Updated July 28, 2026. Quick answer: 22% is the statutory flat rate for supplemental wages up to $1,000,000 — it is an administrative default, not an estimate of your tax. Anyone whose marginal rate is above 22% is under-withheld on every vest.
Where the number comes from
Supplemental wages — bonuses, commissions, and equity vests — are withheld at a flat rate set by regulation: 22% on the first $1,000,000 in a calendar year, 37% on the excess. It is deliberately simple so payroll systems can apply it without knowing anything about you.
The size of the gap
| Your marginal rate | Under-withheld per $100,000 vested |
|---|---|
| 24% | $2,000 |
| 32% | $10,000 |
| 35% | $13,000 |
| 37% | $15,000 |
Federal only, and before state tax. Multiple vests in one year multiply it.
Run your own numbers rather than reading off this table — your marginal rate depends on your whole return, not just the vest.
Why nobody tells you
Payroll is applying the rule correctly. Your broker is reporting the sale correctly. No single party in the chain is responsible for noticing that the default rate does not match your situation. It surfaces at filing, which is the worst possible time to learn it.
Multiple vests compound the problem
The flat rate applies per payment, with no running total of your actual liability. Four vests in a year at 22% each produce four separate shortfalls, and nothing in the system notices the accumulation.
The one case where 22% is too much
If a vest is your main income for the year — a sabbatical, a partial year, a career break — the flat rate can exceed your actual marginal rate and you are lending money to the government until you file. The fix is the same in both directions: compute it rather than assume it.
Sources
IRC §3402(g)(1)(A); Treas. Reg. §31.3402(g)-1 (flat rate on supplemental wages).
This states what the cited authority says. It is not tax advice, and equity compensation interacts with the rest of your return in ways a single page cannot see.