Calculate exactly how much your stock options are worth after taxes. Compare Incentive Stock Options (ISO) vs Non-Qualified Stock Options (NSO) with full AMT, ordinary income, and capital gains tax breakdowns.
Price per share to exercise
Fair market value or sale price
Alternative Minimum Tax rate (default 28%)
Net After-Tax Profit
$0.00
What you take home after all taxes
Gross Profit (Before Tax)
$0.00
Total gain before any taxes
Total Tax Owed
$0.00
All taxes combined
Effective Tax Rate
0.0%
Tax as % of gross profit
📋 Tax Breakdown
⚖️ ISO vs NSO Comparison
✅ ISO (Incentive Stock Options)
⚠️ NSO (Non-Qualified Stock Options)
ISO vs NSO: Understanding the Difference
Stock options give you the right to buy company shares at a fixed strike price. The difference between the market value and your strike price is called the bargain element — that's your profit. But how that profit is taxed depends entirely on whether you have ISOs or NSOs.
📌 Incentive Stock Options (ISO)
ISOs offer significant tax advantages but come with strict rules:
No ordinary income tax at exercise — you don't owe regular income tax on the bargain element when you exercise.
AMT may apply — the bargain element is an AMT preference item, potentially triggering the Alternative Minimum Tax (typically 28%).
Qualified disposition: If you hold shares for at least 1 year after exercise and 2 years after grant, the entire gain is taxed at the lower long-term capital gains rate.
Disqualifying disposition: If you sell too early, the ISO converts to NSO-like treatment for tax purposes.
$100,000 annual limit: ISOs vesting over $100K in a single year lose their favorable treatment on the excess.
📌 Non-Qualified Stock Options (NSO)
NSOs are simpler but less tax-efficient:
Ordinary income at exercise — the bargain element is immediately taxed as regular income at your marginal rate.
Withholding required — employers must withhold payroll taxes (Social Security, Medicare) on the bargain element.
No AMT concern — because income is recognized at exercise, there's no AMT preference item.
Post-exercise gains: If you hold shares after exercise, any additional appreciation is taxed as capital gains (short-term or long-term depending on holding period).
🔑 Key Differences at a Glance
💰 Tax at Exercise
ISO: No ordinary income tax (AMT may apply) NSO: Taxed as ordinary income immediately
📊 Capital Gains
ISO: Full gain taxed at LTCG rates if qualified NSO: Only post-exercise gain is LTCG-eligible
⚠️ AMT Risk
ISO: Significant — bargain element is an AMT preference NSO: None — income already recognized
📋 Holding Rules
ISO: Must hold 1yr post-exercise + 2yr post-grant NSO: No special holding requirements
Bargain Element = (FMV − Strike Price) × Number of Options
This is your paper profit at exercise — the starting point for all tax calculations.
Stock Options FAQ
What's the difference between ISO and NSO?
ISOs (Incentive Stock Options) are tax-advantaged options that can only be granted to employees. They receive favorable tax treatment — no ordinary income tax at exercise (though AMT may apply) and the entire gain can be taxed at long-term capital gains rates if holding period requirements are met. NSOs (Non-Qualified Stock Options) can be granted to employees, contractors, and advisors. They're simpler but less tax-efficient — the bargain element is taxed as ordinary income at exercise, and only post-exercise gains receive capital gains treatment.
How does AMT affect my ISO exercise?
When you exercise ISOs, the bargain element (FMV minus strike price, times shares) becomes an AMT preference item for that tax year. This means it's added back to your income for AMT calculation purposes. If the AMT calculation results in a higher tax than your regular tax, you owe the difference. The standard AMT rate is 28%, with an exemption amount that phases out at higher incomes. Our calculator includes AMT estimation — consult a tax professional for your specific situation.
What is a "qualified disposition" for ISO shares?
A qualified disposition occurs when you sell ISO shares after meeting two holding period requirements: (1) at least 1 year after the exercise date, and (2) at least 2 years after the grant date. When both conditions are met, the entire gain is taxed at the long-term capital gains rate, which is significantly lower than ordinary income rates. If you sell before meeting either requirement, it's a disqualifying disposition, and the bargain element is taxed as ordinary income.
Do I pay taxes when I exercise NSOs even if I don't sell?
Yes. With NSOs, the bargain element (FMV minus strike price, times shares exercised) is treated as ordinary income in the year of exercise — even if you hold the shares. This means you may owe a significant tax bill at exercise time, even though you haven't sold any shares to generate cash. This is why it's important to plan for "taxes at exercise" when dealing with NSOs. Many companies allow cashless exercise to cover taxes.
What happens to stock options when I leave my job?
Most stock option plans have a post-termination exercise window, typically 90 days for ISOs and often longer for NSOs. If you leave voluntarily (quit or retire), you generally have 90 days to exercise your vested options before they expire. If you're terminated for cause, options typically expire immediately. ISOs that are exercised after the 90-day window automatically convert to NSOs. Always check your specific grant agreement — terms vary by company.
Should I exercise ISOs early to minimize AMT?
Early exercise of ISOs can be a powerful strategy to reduce AMT exposure. By exercising early when the FMV is close to the strike price (or during an IPO lockup), the bargain element is small, minimizing the AMT preference. This also starts the holding period clock earlier, potentially qualifying for long-term capital gains treatment sooner. However, early exercise requires cash to buy the shares and the risk that the stock price falls. Some companies offer 83(b) elections for early-exercised options. Consult a tax advisor before pursuing this strategy.
⚠️ Financial Disclaimer: This calculator provides estimates for educational purposes only. Tax laws are complex and subject to change. Results are not guaranteed and should not be considered financial or tax advice. Consult a qualified CPA, tax attorney, or financial advisor for personalized guidance on your stock option decisions.