RSU Refresh Grants: How They Stack Across Four-Year Windows

A staff engineer at Google joined in 2021 with a 1,000-share initial grant vesting 25/25/25/25. In 2022 the annual refresh was 300 shares on the same schedule. In 2023 the refresh was 350 shares. In 2024, 400. In 2025, 450. By early 2026, four separate grants were delivering shares in the same calendar year. The 2021 grant was on its final year. The 2022 grant had two years to go. The 2023 grant had three. The 2024 grant was vesting its first full tranche. The 2025 grant was just starting.

Total 2026 RSU vest: 250 + 75 + 87.5 + 100 + 112.5 = 625 shares. At a $175 stock price, that produced $109,375 of W-2 income on top of the $275,000 base and bonus. The supplemental withholding applied correctly at 22% produced roughly $24,000 of federal withholding against a true marginal tax of close to $38,000 on that slab. A $14,000 shortfall, every year, for the next three years.

Refresh grants are the lever public tech companies use to keep senior employees from leaving. They also produce a compounding tax complication that most employees do not see coming until their fourth year.

Why refreshes exist

The initial four-year grant delivers equity at the grant-date target. By year three, the employee has been promoted, has received merit increases, and is producing more value than the original grant contemplated. The market rate for a staff engineer in 2024 is higher than the market rate was in 2021. Without refreshes, the employee’s total compensation steadily falls behind, and the gap becomes a reason to interview elsewhere.

Refreshes are typically annual and sized to restore total compensation to the target band. At Google, Meta, and Microsoft, annual refreshes for senior engineers often run 25 to 50% of the initial grant. At Amazon, the sign-on bonuses and back-weighted schedule substitute for part of the refresh function, but additional equity grants are still layered on.

The communicated vs delivered distinction

A refresh grant is communicated as a dollar value. “Your 2025 refresh is $250,000.” The share count is set by dividing that dollar value by the stock price on the grant date. Vesting is then on shares, not dollars. If the stock doubles, the refresh is worth $500,000 at vest. If it halves, it is worth $125,000.

This gap matters for planning because employees often treat the communicated dollar value as the thing they are receiving. They are actually receiving a share count whose ultimate value is path-dependent.

The stacking math

Stacking is the result of overlapping four-year vesting schedules. By year four of employment, you have the final tranche of grant one, the third tranche of grant two, the second tranche of grant three, and the first tranche of grant four all vesting simultaneously.

Take a senior engineer with the following grant history:

Grant year	Shares	Notes
2021 (initial)	1,000	Standard 4-year, 25% annually
2022 refresh	300
2023 refresh	350
2024 refresh	400
2025 refresh	450

In calendar year 2026, the vesting schedule looks like this:

Grant	Tranche	Shares vesting
2021	Year 5 (final)	250
2022	Year 4	75
2023	Year 3	87.5
2024	Year 2	100
2025	Year 1	112.5
Total		625

The cumulative share count has grown each year even though the annual refresh is steady. By 2027, the 2021 grant rolls off, so year-over-year delivered equity might flatten or decline if the 2026 refresh is not larger. This is why companies scale refreshes to match promotion cycles: to keep the total comp curve rising through senior tenure.

How stacking breaks withholding

Supplemental withholding uses the flat 22% rate for most employees. A senior engineer whose marginal federal rate is 32%, 35%, or 37% experiences a 10 to 15 percentage point gap on RSU income. When stacking increases annual RSU income from $50,000 in year one to $175,000 in year four, the absolute gap grows from $5,000 to over $20,000.

The gap is worst in the first year a senior engineer crosses $1 million of W-2 compensation. The 37% rate kicks in on supplemental wages above $1M, so the withholding accurately matches marginal rate on that tranche. Below $1M, the 22% rate persists. An engineer with $800,000 of W-2 income who is 37% marginal federally is under-withheld by 15 percentage points on every RSU dollar.

California and other high-tax states

California applies a supplemental rate of 10.23% on bonus and RSU income, regardless of the federal pattern. That rate is reasonably close to a senior employee’s true California marginal rate once the state brackets are applied, so the state-level shortfall is smaller than the federal. New York City employees face a state plus local combined marginal rate near 13.5% at senior-engineer income levels, with a state supplemental rate of 11.7%. The gap exists, but it is smaller.

The estimated tax response

The IRS safe harbor under IRC §6654 requires paying in, through withholding plus estimates, either 90% of current-year tax or 110% of prior-year tax. For an engineer whose RSU income is growing year over year, the 110%-of-prior-year number is usually the lower bar, because current-year tax is higher than prior-year tax by the refresh stacking amount.

Paying to the 110% floor avoids the underpayment penalty but still leaves a balance due on April 15. For engineers with growing RSU income, the balance due grows by the refresh stacking each year.

When the W-4 additional withholding approach works

Some employees file a W-4 with additional federal withholding on base salary. This works mathematically but requires the base salary to be large enough that the additional withholding does not produce a negative paycheck. A $30,000 annual shortfall spread across 26 pay periods is $1,154 per period. For a $275,000 base salary at biweekly pay, that is absorbable. For a $180,000 base salary, it starts to pinch.

The sell-to-cover vs net-share tradeoff

Companies deliver RSUs using one of two patterns. Sell-to-cover has the company calculate the tax at the supplemental rate, sell exactly enough shares at the vest-date market price to cover, and deposit the remainder into the employee’s brokerage. Net-share settlement has the company withhold shares directly at a value equal to the tax at supplemental rate.

Both patterns deliver the same after-tax position at the 22% rate. Neither pattern self-corrects for a 37% marginal employee. Some companies allow employees to elect a higher withholding rate. Most do not.

The decision about what to do with the delivered shares is separate from the withholding decision. Selling delivered shares immediately eliminates concentration and funds any estimated payment the employee needs to make. Holding delivered shares is a separate investment decision made with capital that already has tax owed against it.

Modeling stacking across promotion cycles

A senior engineer who expects a promotion in the next 18 months should model refresh trajectories under multiple scenarios. A promotion typically triggers a one-time equity top-up plus a higher annual refresh target. An engineer moving from L6 to L7 at Google might see a $400,000 promotion grant plus annual refreshes moving from $200,000 to $400,000. That changes the stacking curve for the next four years.

The modeling matters because the year of the promotion is often the first year W-2 income crosses $1 million. That is the year supplemental withholding begins to self-correct on the margin. Pre-promotion planning that overweights the withholding gap may over-state the shortfall in the promotion year.

Frequently asked

Do refresh grants start the QSBS clock?

QSBS under IRC §1202 requires stock held for more than five years from issuance. RSUs are not issued until they settle. The settlement date is when the shares exist for §1202 purposes. For public-company RSUs, QSBS is irrelevant because the company is not a qualified small business.

Can I defer a refresh grant’s vest?

Deferral of RSUs is governed by §409A. Most plans do not offer deferral elections. Those that do impose strict timing rules and typically require the election before the services creating the right are performed.

What happens to unvested refreshes if I leave?

Unvested RSUs are forfeited on termination under almost all public-company plans. Good-reason and change-of-control provisions sometimes accelerate vesting, but ordinary voluntary departures forfeit the unvested balance.

Should I sell at vest or hold?

From a concentration-risk perspective, sell at vest. From a tax-efficiency perspective, it depends on your expected holding period and the stock’s prospects. Cost basis at vest equals the compensation amount, so there is no embedded gain to recognize by selling. Holding exposes capital to single-stock risk for the possibility of long-term capital gain treatment on future appreciation.

Why does my RSU income look so much higher than HR quoted?

The HR quote is the grant-date dollar value. The W-2 amount is the vest-date value. If the stock appreciated between grant and vest, the W-2 number is higher. The difference is a function of stock performance, not a mistake.

Before December, run a projection across your stacked grants using the RSU withholding gap calculator and size a Q4 estimated payment to the safe harbor.