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Stock Options Tax Calculator

Calculate the tax on ISO and NSO stock options for 2026. Model AMT exposure at ISO exercise, ordinary income tax on NSO spreads, LTCG at sale, and compare ISO vs NSO side-by-side with 2026 federal brackets (10-37%), AMT exemption ($88,100 single / $137,000 MFJ), and FICA.

Calculate ISO tax with AMT exposure — qualifying vs disqualifying disposition
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The price you pay to exercise each option
$
Fair market value on the date you exercise
Shares you're exercising
Qualifying: hold 2yr from grant, 1yr from exercise
$
Price per share when you sell
$
Your income before options exercise
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How to Use This Calculator

ISO tab

Model the tax impact of exercising Incentive Stock Options. Enter your strike price, FMV at exercise, and number of shares. Choose your holding period: qualifying (2yr from grant + 1yr from exercise) or disqualifying (sold early). Expand "More options" to add your expected sale price, filing status, and other income. The calculator shows the bargain element, AMT preference item, AMT exposure, and long-term capital gains tax at sale.

NSO tab

Model Non-Qualified Stock Options. The bargain element (FMV minus strike, times shares) is taxed as ordinary income at exercise. Select whether you're an employee (FICA applies: SS + Medicare) or a contractor (no FICA). The calculator shows the ordinary income tax at exercise, total FICA, and LTCG on any post-exercise appreciation if you hold 1 year or more.

ISO vs NSO tab

Enter the same grant parameters and compare total after-tax proceeds under ISO treatment (qualifying disposition) vs NSO treatment (employee, hold 1yr+). The calculator shows every line item side-by-side and highlights which type saves more in your specific situation. ISOs defer tax and get LTCG rates, but create AMT risk. NSOs tax immediately but have no AMT surprise.

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The Formula

Bargain Element = (FMV at Exercise − Strike Price) × Shares

ISO — Qualifying Disposition:
 Tax at exercise = $0 (regular income tax)
 AMT preference item = Bargain Element
 AMT = max(0, Tentative Minimum Tax − Regular Tax)
 Tentative Minimum Tax = (AMTI − Exemption) × 26%/28%
 Tax at sale = (Sale Price − Strike Price) × Shares × LTCG rate

ISO — Disqualifying Disposition:
 Ordinary income at sale = Bargain Element (taxed at marginal rate)
 Additional gain at sale = (Sale Price − FMV at Exercise) × Shares

NSO:
 Ordinary income at exercise = Bargain Element × Marginal Rate
 FICA = SS (6.2% up to $184,500) + Medicare (1.45%) + Add'l Medicare (0.9%)
 Tax at sale = (Sale Price − FMV at Exercise) × Shares × LTCG rate (if held 1yr+)

2026 AMT Exemption: $88,100 single / $137,000 MFJ
AMT rates: 26% on first $232,600 AMTI / 28% above
LTCG rates: 0% / 15% / 20% (thresholds: $49,450 / $545,500 single)

The key insight: ISOs look "free" at exercise but create hidden AMT. NSOs are taxed immediately and visibly. The winner depends on AMT exposure, your marginal bracket, and how much the stock appreciates after exercise.

Example

Alex — Senior Engineer, startup pre-IPO

Alex has 1,000 stock options at a $10 strike price. The company just raised a Series B and the 409A valuation sets FMV at $50/share. Alex plans to hold and expects to sell at $70 at IPO. She earns $100K in salary and files single.

ISO tab — qualifying disposition

Bargain element$40,000
Regular income tax at exercise$0
AMT preference item$40,000
AMT owed (after $88,100 exemption)$0
LTCG at sale ($70 − $10 x 1,000)15% on $60,000 = ~$8,800
Net after tax~$51,200

Because Alex's total AMTI ($100K salary + $40K bargain element = $140K) is below the $88,100 exemption + regular taxable income, she owes zero AMT. The full $60K gain is taxed at 15% LTCG. She pays roughly $8,800 in total — an 14.7% effective rate on her $60K gain.

NSO tab — same inputs

Bargain element at exercise$40,000
Ordinary income tax (22% marginal)~$8,800
FICA on $40K (SS + Medicare)~$3,060
LTCG at sale ($70 − $50 x 1,000)15% on $20,000 = ~$2,700
Total tax~$14,560
Net after tax~$45,440

The NSO path costs Alex roughly $5,760 more in this scenario. The difference comes from FICA on the bargain element and ordinary income tax vs LTCG. ISOs win here because the bargain element is small enough to avoid AMT.

ISO vs NSO tab — verdict

With these inputs, ISO saves approximately $5,760 over NSO. However, if Alex's company were at a much higher valuation — say FMV of $200 vs $10 strike — the ISO bargain element would be $190K, easily triggering AMT and potentially eliminating the ISO advantage or even flipping it in NSO's favor.

FAQ

ISOs (Incentive Stock Options) are granted only to employees and receive preferential tax treatment: no ordinary income tax at exercise if you hold the shares long enough (qualifying disposition). However, the bargain element is an AMT preference item, which can trigger Alternative Minimum Tax. NSOs (Non-Qualified Stock Options) can be granted to employees, contractors, or advisors. The bargain element — the difference between FMV and your strike price — is taxed as ordinary income at exercise, plus FICA for employees. NSOs have no AMT risk but create an immediate tax bill.
ISOs trigger AMT when the bargain element plus your regular income pushes Alternative Minimum Taxable Income (AMTI) above the AMT exemption — $88,100 for single filers or $137,000 MFJ in 2026. For example, if you have $100K salary and exercise ISOs with a $200K bargain element, your AMTI is $300K. After the $88,100 exemption, $211,900 is subject to AMT at 26%, creating a $55,094 tentative minimum tax. If your regular tax is only $20K, you owe $35,094 in additional AMT. Use the ISO tab to model your exact exposure before exercising.
A qualifying ISO disposition requires holding the shares for at least 2 years from the grant date AND at least 1 year from the exercise date. If both conditions are met, your entire gain (sale price minus strike price, times shares) is taxed as long-term capital gains at 0%, 15%, or 20%. If you sell early (disqualifying disposition), the bargain element at exercise becomes ordinary income in the year of sale — not exercise — reported on your W-2.
Yes. When you exercise NSOs, your cost basis in the shares equals the FMV on the exercise date — not the strike price. The bargain element is already taxed as ordinary income. When you sell, you only owe capital gains tax on appreciation above the FMV at exercise. If held more than 12 months, that appreciation qualifies for LTCG rates (0%, 15%, or 20%). Make sure your broker has the correct adjusted cost basis on Form 1099-B — many brokers report the strike price as basis, which would double-tax the bargain element you already paid income tax on.
Exercising ISOs early — when the stock price is close to your strike price — minimizes the bargain element and AMT exposure. This is common at early-stage startups with low 409A valuations. However, you take on liquidity risk (paying for shares in a private company) and market risk (shares could lose value). If the spread is already large, consider spreading exercises across tax years to stay below the AMT threshold. The ISO tab in this calculator lets you model different strike, FMV, and income combinations to find the optimal exercise strategy.
If you're an employee, your employer is required to withhold FICA on the bargain element when you exercise NSOs. This includes Social Security (6.2% on wages up to $184,500) and Medicare (1.45% on all wages, plus 0.9% Additional Medicare above $200K for single filers / $250K MFJ). Contractors and advisors receiving NSOs are not subject to FICA — but they may owe self-employment tax if the options are compensation for services. ISOs are exempt from FICA entirely.

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LTCG and STCG rates on stock sales — 0%, 15%, 20% brackets for 2026.
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