Estimate taxes on your stock options. Compare ISO vs NSO tax treatment, see the impact of holding periods, and understand AMT exposure.
Incentive Stock Options (ISOs) receive favorable tax treatment if you meet the holding period requirements: you must hold the shares for at least 1 year after exercise and 2 years after the grant date. Meeting both qualifies as a "qualifying disposition" and the entire gain is taxed at the long-term capital gains rate (typically 15%).
If you sell ISO shares before meeting the holding requirements (a "disqualifying disposition"), the spread between exercise price and fair market value at exercise is taxed as ordinary income, similar to NSO treatment.
Non-Qualified Stock Options (NSOs) are simpler: the spread at exercise is always taxed as ordinary income, regardless of how long you hold the shares. Your employer withholds taxes on this amount just like regular wages.
ISOs can trigger the Alternative Minimum Tax (AMT). The spread at exercise is an AMT preference item, meaning you may owe AMT even if you have not sold the shares yet. The simplified AMT estimate shown here uses a 28% rate on the spread — your actual AMT depends on your full tax picture.