Stock Options Tax Calculator 2026 β€” ISO vs NSO

Calculate taxes on stock options. Compare ISO vs NSO tax treatment at exercise and sale. Includes AMT calculation for ISOs and side-by-side comparison.

Total shares you want to exercise
$
Your option exercise price
$
Current fair market value (409A or public price)
$
Your salary from employment this year
%
CA=9.3%, NY=6.85%, TX/FL=0%
Only applies to ISOs
$0
Total Tax Owed
$0
Spread Value (Total)
$0
Tax at Exercise
$0
Net After All Taxes

Tax Breakdown

ISO vs NSO Side-by-Side Comparison

Tax Item ISO NSO

How Stock Options Are Taxed

NSOs (Non-Qualified Stock Options) are straightforward: when you exercise, the spread (FMV minus strike price) is treated as ordinary W-2 income. Your employer withholds FICA (Social Security 6.2% + Medicare 1.45%) and income tax. The spread is reported on your W-2. Any future appreciation when you eventually sell is capital gains (short or long term).

ISOs (Incentive Stock Options) are more complex. No regular tax at exercise β€” but the spread is an AMT preference item. If your AMT liability exceeds your regular tax, you pay AMT (26–28%). If you hold shares for a qualifying disposition (2 years from grant, 1 year from exercise), all gain is taxed at favorable long-term capital gains rates. Selling early creates a disqualifying disposition: spread taxed as ordinary income.

The Formula

Spread = (FMV βˆ’ Strike Price) Γ— Shares

NSO at Exercise: Ordinary income tax + FICA (6.2% SS + 1.45% Medicare) + state tax

ISO at Exercise: AMT preference item. AMT = max(0, (Spread Γ— AMT rate) βˆ’ Regular tax)
AMT Exemption 2026: $88,100 (single) / $137,000 (MFJ)
AMT Rate: 26% on first $248,300, 28% above

ISO Qualifying Sale: LTCG rates (0% / 15% / 20%) on total gain above strike

Example

10,000 options, $5 strike, $25 FMV, $120K W-2 income, Single, CA (9.3%):
Spread: (25 βˆ’ 5) Γ— 10,000 = $200,000

NSO: $200K taxed as ordinary income. Federal at ~32–35% marginal + 9.3% CA + FICA β‰ˆ $94,000 in taxes. Net: ~$106,000

ISO (qualifying): No tax at exercise (but AMT check needed). At qualifying sale: $200K LTCG at 15% + 9.3% CA β‰ˆ $48,600. Net: ~$151,400

ISO savings over NSO: ~$45,000 β€” but watch the AMT trap!
Extended

Exercise Timing Optimizer

See tax impact at different FMV prices and find when ISO AMT becomes a problem

See how taxes change at different stock prices. Compare ISO vs NSO at each FMV level and find where AMT becomes a problem.

FMV per Share Total Spread NSO Tax at Exercise ISO Regular Tax ISO AMT ISO Net (qualifying) NSO Net
AMT Threshold Analysis

Frequently Asked Questions

What is the difference between ISOs and NSOs?
ISO (Incentive Stock Options) are only available to employees and offer potential tax advantages: no regular income tax at exercise, and qualifying dispositions are taxed entirely at long-term capital gains rates. NSOs (Non-Qualified Stock Options) are available to employees, contractors, and directors. The spread at exercise is taxed as ordinary W-2 income, subject to income tax and FICA (Social Security + Medicare).
What is the AMT trap for ISOs?
Although ISOs avoid regular income tax at exercise, the spread (FMV minus strike price) is an AMT preference item. If you hold ISO shares through year-end, you may owe Alternative Minimum Tax. This AMT is calculated at 26–28% on income above the exemption ($88,100 single / $137,000 MFJ in 2026). Many employees were caught by this trap during dot-com and tech booms β€” they exercised ISOs, owed AMT, then the stock crashed before they could sell to pay it.
What is a qualifying ISO disposition?
A qualifying disposition occurs when you hold ISO shares for at least 2 years from the grant date AND at least 1 year from the exercise date. All gain is then taxed at long-term capital gains rates (0%/15%/20%). A disqualifying disposition (selling too early) converts the spread to ordinary income, eliminating the tax advantage.
What is an 83(b) election for stock options?
An 83(b) election allows employees to pay income tax on unvested restricted stock or early-exercised options at grant/exercise (when the value may be near zero) rather than at vesting (when the value may be much higher). Must be filed within 30 days of exercise. If the stock appreciates significantly, this can save substantial taxes. But if the stock declines or is forfeited, you paid tax on value you never received.
Should I exercise ISOs before year-end to avoid AMT?
Not necessarily. The AMT impact depends on the spread size, your other income, and AMT exemption phase-outs. If the spread is modest and your income is not near the phase-out range, you may owe little or no AMT. Run the numbers using this calculator. Also consider: exercising before an IPO lock-up expiration can start the 1-year holding period clock for qualifying disposition, potentially saving taxes on appreciation after the IPO.

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