Equity Tax Estimator
Estimate taxes on NSO, ISO, and RSU equity compensation at exercise or vesting, including AMT exposure and net proceeds.
Equity Tax Treatment Explained
NSO — Non-Qualified Stock Options
When you exercise NSOs, the spread (FMV minus strike price) is treated as ordinary income in the year of exercise. You pay income tax plus payroll taxes (FICA) on that amount regardless of whether you sell the shares. Your cost basis in the shares is FMV at exercise, and any future appreciation is a capital gain when sold.
ISO — Incentive Stock Options
ISO exercise triggers no regular income tax — but the spread is an AMT preference item. If your total AMT income exceeds the exemption amount ($137,000 for single filers in 2024), you may owe 28% Alternative Minimum Tax on the excess. If you hold ISO shares for 2+ years from grant and 1+ year from exercise, the eventual sale qualifies for long-term capital gains rates. Selling earlier triggers a disqualifying disposition taxed like an NSO.
RSU — Restricted Stock Units
RSUs are taxed as ordinary income at vesting based on FMV on the vest date. FICA taxes apply up to the Social Security wage base ($168,600 in 2024). Medicare tax (1.45%, plus 0.9% above $200K) has no wage cap. Your employer typically withholds by selling shares automatically. Your cost basis equals FMV at vest, and subsequent price changes create capital gains or losses at sale.
Capital gains at sale
Shares held more than 1 year qualify for long-term capital gains rates (0%, 15%, or 20% depending on income). Shares sold within 1 year are short-term capital gains taxed at your ordinary income rate. State taxes apply to all equity income in most states.