The Amazon RSU vesting schedule is back-loaded: 5% in Year 1, 15% in Year 2, then 40% in Years 3 and 4. This delivers most of your shares late, creating large tax events in Years 3-4 that the 22% supplemental withholding rate rarely covers.
Amazon's RSU program is one of the most distinctive in tech. Unlike most companies that vest equity evenly over four years, Amazon uses this back-loaded structure that delivers the bulk of your shares in Years 3 and 4. This creates unique tax planning challenges that catch many employees off guard.
This guide covers Amazon's vesting structure, how your RSUs are taxed, and practical strategies to manage the large tax events that come with back-loaded vesting.
The Amazon RSU Vesting Schedule
Amazon RSUs follow a 5/15/40/40 vesting schedule over four years:
| Year | Vesting % | Cumulative | Typical Vest Dates |
|---|---|---|---|
| Year 1 | 5% | 5% | End of Year 1 |
| Year 2 | 15% | 20% | Every 6 months |
| Year 3 | 40% | 60% | Every 6 months |
| Year 4 | 40% | 100% | Every 6 months |
Starting in Year 2, shares vest semi-annually — typically in May and November. The exact dates depend on your start date and grant agreement.
Example: 100-Share Grant
| Period | Shares Vesting | Running Total |
|---|---|---|
| Year 1 (end) | 5 | 5 |
| Year 2 (May) | 7-8 | 12-13 |
| Year 2 (Nov) | 7-8 | 20 |
| Year 3 (May) | 20 | 40 |
| Year 3 (Nov) | 20 | 60 |
| Year 4 (May) | 20 | 80 |
| Year 4 (Nov) | 20 | 100 |
The Year 3-4 jump is dramatic. You go from receiving 15% of your grant in Year 2 to 40% in Year 3. If Amazon's stock price has appreciated since your hire date, the dollar value of those Year 3-4 vests can be significantly larger than you planned for.
How Amazon's Total Compensation Works
Amazon uses a Total Compensation Package (TCP) approach. When you're hired, Amazon targets a total annual compensation number and fills it with a mix of:
- Base salary (Amazon raised its long-standing base-pay cap to roughly $350,000 for most corporate roles in 2022; actual base still varies widely by level)
- Signing bonus (Years 1-2, to offset the low early vesting)
- RSUs (back-loaded to Years 3-4)
The signing bonus is designed to make your total comp relatively level across all four years. But once the signing bonus runs out after Year 2, your RSU vests become a much larger portion of your income — and your tax bill reflects that.
Refresh Grant Stacking Math
The real complexity begins when annual refresh grants overlap with your initial grant. Amazon awards refresh grants each year based on performance, and each follows its own 5/15/40/40 schedule. By Year 4, you can have three grants vesting simultaneously.
Example: L5 Engineer with stacking grants at $190/share
| Grant | Shares | Year Granted | Year 4 Vesting (40%) | Shares in Year 4 |
|---|---|---|---|---|
| Initial | 200 | Year 0 | Year 4 (final year) | 80 |
| Refresh 1 | 50 | Year 1 | Year 3 of this grant (40%) | 20 |
| Refresh 2 | 60 | Year 2 | Year 2 of this grant (15%) | 9 |
| Total | 109 shares |
At $190/share, those 109 shares produce $20,710 in RSU income just from Year 4 vesting. But this is only the semi-annual picture — over the full year with both May and November vests, the numbers double:
| Vest Period | Initial Grant | Refresh 1 | Refresh 2 | Total Shares | Value at $190 |
|---|---|---|---|---|---|
| May | 40 | 10 | 4-5 | ~55 | $10,450 |
| November | 40 | 10 | 4-5 | ~55 | $10,450 |
| Full Year | 80 | 20 | ~9 | ~109 | $20,710 |
Add the L5 base salary of $170,000, and this employee's W-2 reaches roughly $190,700 in Year 4 — assuming no stock price appreciation. If the stock has grown 20% since the original grants, the RSU portion jumps proportionally and the W-2 climbs above $200K.
Year 4-5 is the danger zone. Most Amazon employees plan their finances around their initial offer letter. They forget that refresh grants stack multiplicatively. By Year 4, your RSU income can be 2-3x what your initial grant alone would produce — pushing you solidly into the 32% federal bracket and creating significant withholding shortfalls.
For a detailed breakdown of how withholding shortfalls grow with stacking grants, see our estimated taxes guide.
How Amazon RSUs Are Taxed
Amazon RSU income is taxed as ordinary income at the time of vesting. The fair market value (FMV) of the shares on the vest date is added to your W-2 income (IRS Publication 525).
Withholding
Amazon withholds taxes on RSU vests at the supplemental income rate (IRS Publication 15):
| Tax | Rate |
|---|---|
| Federal | 22% (37% for amounts over $1M in a year) |
| Social Security | 6.2% (up to $176,100 wage base in 2025) |
| Medicare | 1.45% (+ 0.9% Additional Medicare Tax over $200K) |
| California (if applicable) | 10.23% |
| Washington | 0% (no state income tax) |
The Withholding Shortfall Problem
The 22% federal supplemental rate is almost certainly not enough if you're in the 32% or higher bracket — which most Amazon employees with significant RSU vests are.
Example: Year 3 vest for an L5 engineer
Assume 200 shares vest in Year 3, stock price is $190/share:
| Item | Amount |
|---|---|
| RSU income | 200 × $190 = $38,000 |
| Federal withheld (22%) | $8,360 |
| Actual federal tax (~32% bracket) | $12,160 |
| Federal shortfall | $3,800 |
If you're in California, add the difference between 10.23% withheld and your actual CA marginal rate (up to 13.3%). Over two Year 3-4 vesting events, shortfalls can add up to $10,000+.
The chart below shows how the supplemental withholding rate compares to the marginal rates Amazon employees actually pay as their RSU income grows.
Your Real RSU Tax Rate vs What's Withheld
Single filer, California — salary + RSU vesting
| Salary (USD) | RSU vest (USD) | Effective tax rate (%) | Shortfall vs 22% withholding (USD) |
|---|---|---|---|
| 150000 | 50000 | 42 | 4800 |
| 200000 | 100000 | 47 | 12200 |
| 300000 | 150000 | 50 | 19500 |
| 500000 | 200000 | 53 | 28000 |
For a deeper dive on RSU withholding gaps, see our RSU tax withholding guide.
What will your Amazon vest actually net you?
Amazon's backloaded 5/15/40/40 schedule plus refreshers makes withholding messy. Enter your grant to see your real tax and take-home — free, about 60 seconds, no signup.
See my Amazon RSU taxes →Role-Level Compensation Examples
Tax impact varies dramatically by level at Amazon. The table below shows typical compensation and resulting tax brackets for each level, assuming Year 3-4 vesting at $190/share with at least one refresh grant layered in.
| Level | Base Salary | Typical Initial RSU Grant | Year 3-4 Annual RSU Income (at $190/share) | Total W-2 | Federal Bracket |
|---|---|---|---|---|---|
| L4 (SDE I) | $150,000 | 50 shares | ~$9,500 | ~$160,000 | 22% |
| L5 (SDE II) | $170,000 | 200 shares | ~$38,000 | ~$208,000 | 32% |
| L6 (Senior SDE) | ~$220,000 | 500 shares | ~$95,000 | ~$315,000 | 35% |
| L7 (Principal) | ~$300,000 | 1,000 shares | ~$190,000 | ~$490,000 | 35% |
Key observations:
- L4 employees often stay in the 22% bracket even in Years 3-4, so the supplemental withholding rate (22%) roughly covers their federal liability. Tax surprises are minimal at this level.
- L5 employees cross into the 32% bracket once RSU vesting picks up. The 10-percentage-point gap between the 22% supplemental rate and the 32% marginal rate generates a meaningful shortfall — roughly $3,800 per year on RSU income alone.
- L6 and L7 employees face the steepest shortfalls. At $300K+ in total W-2 income, the 35% marginal rate means every RSU dollar is under-withheld by 13 percentage points. For an L7 with $190K in annual RSU income, that is a $24,700 annual federal shortfall before state taxes.
- California-based L7 employees can see combined marginal rates above 50% (35% federal + 13.3% CA + 2.35% Medicare). An L7 in the Bay Area should plan for roughly $190K+ in total annual taxes.
Use our RSU calculator to model your exact scenario based on your level, grant size, and state.
Common Mistakes Amazon Employees Make
-
Not planning for Year 3-4 tax spikes. The transition from signing-bonus-heavy comp to RSU-heavy comp catches people off guard. Your effective income can jump significantly.
-
Assuming withholding covers your tax bill. It rarely does. The 22% supplemental rate underpays for anyone in the 32%+ bracket.
-
Forgetting about refresh grants. Amazon awards additional RSU grants annually. These grants layer on top of your original grant, creating stacked vesting that can push you into even higher tax brackets in Years 3-4.
-
Not making estimated tax payments. If your withholding shortfall is large enough, you may owe an underpayment penalty. Consider making quarterly estimated payments.
Planning Around the Amazon RSU Vesting Schedule
- Calculate your expected vesting income for the year early and adjust your W-4 or make estimated payments to avoid a shortfall at tax time.
- Track refresh grants separately. Each grant has its own 4-year schedule. Multiple overlapping grants mean your annual RSU income grows each year.
- Use our RSU calculator to model your exact tax situation based on your grant size, stock price, and filing status.
State Tax: Washington vs California
Most Amazon corporate employees work in Seattle (Washington) or secondary offices in the Bay Area, New York, and Austin. The state you work in has an enormous impact on your after-tax income.
The chart below visualizes how the same equity income is taxed differently across states, which is the core of the Seattle-versus-Bay-Area decision.
State Tax on the Same $100K RSU Vest
$200K salary, single filer — state tax varies by $9,300+
| State | Incremental state tax on $100K RSU (USD) | Effective state rate (%) |
|---|---|---|
| California | 9300 | 9.3 |
| New York | 6850 | 6.85 |
| Texas | 0 | 0 |
| Washington | 0 | 0 |
Side-by-side: L5 Engineer at $208,000 W-2 Income
| Tax Category | Washington | California |
|---|---|---|
| State income tax rate | 0% | ~9.3% marginal (at $208K) |
| State income tax owed | $0 | ~$14,200 |
| Capital gains tax (if holding) | 7% on gains > $270K | Taxed as ordinary income (up to 13.3%) |
| Mental Health Services Tax | N/A | 1% on income over $1M |
| Annual state tax on W-2 | $0 | ~$14,200 |
That is a $14,200 annual difference at the L5 level. For an L6 at ~$315K W-2, the gap widens to roughly $20,000 per year. For an L7 at ~$490K, the California state tax bill alone exceeds $30,000.
Washington does impose a 7% tax on long-term capital gains exceeding $270,000 (as of 2025). This only applies if you hold shares after vesting and sell them at a gain — it does not apply to the ordinary income recognized at vesting, which is the majority of your RSU tax liability. Most Amazon employees who use sell-to-cover will never trigger this tax.
Seattle headquarters advantage: The majority of Amazon's corporate workforce is based in Washington state. If you are evaluating a transfer between Amazon offices, the state tax savings alone can be worth $15,000-$30,000 per year depending on your level — equivalent to a significant raise with no change in base pay or equity.
For state-specific details, see our California income tax guide, Washington income tax guide, and state income tax comparison.
Calculate RSU Withholding
Estimate your RSU tax withholding and net proceeds after vesting.
Try Calculator →Tax Return Reporting
Amazon RSU income appears on your W-2 in Box 1 (Wages, tips, other compensation), combined with your base salary and signing bonus. There is no separate line item — your employer has already included it in your total wages. The taxes withheld through sell-to-cover appear in Box 2 (federal), Box 17 (state), and Boxes 4/6 (FICA).
When you sell shares — whether immediately through sell-to-cover or later — your broker (typically Morgan Stanley for Amazon) reports the sale on Form 1099-B. The cost basis reported is the FMV on the vest date (the same amount included in your W-2). For sell-to-cover transactions executed on the vest date, the gain or loss is typically near $0 because the sale price and the vest-date FMV are the same or very close.
Important: Track the vest-date FMV for every lot of shares you keep. If you hold shares and sell them later, your capital gain or loss is calculated as the sale price minus the vest-date FMV. Failing to use the correct cost basis can result in double taxation — you would pay ordinary income tax at vesting and then pay capital gains tax on income you already reported. For a full walkthrough, see our tax return guide.
Estimated Tax Payments
When your Year 3-4 withholding shortfall exceeds $1,000 at filing time, the IRS may assess an underpayment penalty (Form 2210). This is common for L5+ Amazon employees whose RSU vests are withheld at 22% but taxed at 32% or higher.
To avoid the penalty, meet the safe harbor threshold: pay at least 100% of your prior year's total tax liability through withholding and estimated payments (110% if your AGI exceeds $150,000, which applies to nearly all Amazon employees with RSU income). The most practical approach is to start making quarterly estimated payments (Form 1040-ES) beginning in Year 3 when vesting accelerates. Pay dates are April 15, June 15, September 15, and January 15.
For step-by-step guidance, see our estimated taxes guide and quarterly estimated tax guide.
Frequently Asked Questions
What is Amazon's RSU vesting schedule?
Amazon RSUs vest over 4 years on a back-loaded 5/15/40/40 schedule. You receive 5% at the end of Year 1, 15% in Year 2, 40% in Year 3, and 40% in Year 4. Starting in Year 2, vesting occurs semi-annually.
When do Amazon RSUs vest?
After the initial Year 1 cliff, Amazon RSUs vest every 6 months — typically in May and November. The exact dates depend on your hire date and grant agreement.
How are Amazon RSUs taxed?
Amazon RSU income is taxed as ordinary income on the vesting date. The share price on the vest date multiplied by the number of shares becomes W-2 income, subject to federal, state, and FICA taxes.
Do Amazon RSUs have a cliff?
Yes. The first 5% of your grant vests at the end of Year 1. No shares vest before that date. This is effectively a 1-year cliff, though it's a smaller cliff than the typical 25% at most tech companies.
How do refresh grants work at Amazon?
Amazon awards additional RSU grants (refresh grants) annually based on performance. Each refresh grant follows its own 4-year vesting schedule, which layers on top of existing grants. After 3-4 years at Amazon, you may have multiple overlapping grants vesting simultaneously.
Tax Disclaimer: This content is for educational purposes only. Always consult with a licensed tax professional or certified public accountant before making financial decisions related to equity compensation, tax planning, or investment strategies.