2026 equity compensation
ISO vs NSO Stock Option Tax Calculator
Exercising stock options triggers very different tax outcomes for ISOs and NSOs. Model your spread, AMT exposure, supplemental withholding, and state tax before you exercise.
Frequently Asked Questions
What is the difference between ISO and NSO?
ISOs (incentive stock options) generally have no regular income tax at exercise, but the spread is an AMT preference item. NSOs (non-qualified stock options) treat the spread as ordinary income at exercise, with federal supplemental withholding.
How do I avoid AMT on ISO exercise?
Common strategies include exercising in a lower-income year, exercising in smaller tranches, and holding shares to meet qualifying disposition rules. AMT is complex — consult a tax advisor for your specific situation.
Are NSO gains taxed as income?
Yes. The spread at exercise — fair market value minus strike price — is ordinary W-2 income subject to federal supplemental withholding, FICA, and state income tax.
Which is better — ISO or NSO?
ISOs are generally more tax-advantaged if you can avoid AMT and meet qualifying disposition requirements. NSOs are simpler but taxed as ordinary income at exercise. The better choice depends on your income, AMT exposure, and holding plans.
Data Sources & Methodology
ExactTakeHome tax data is sourced from official government publications and verified against primary sources. Last verified: .
- Federal withholding: IRS Publication 15-T — Federal Income Tax Withholding Methods
- Social Security wage base: SSA 2026 Social Security Wage Base
- Medicare rates: IRS Topic No. 751 — Social Security and Medicare Withholding Rates
- State income tax: California Franchise Tax Board — 2026 California Employer's Withholding Schedules