HenryCalc

NSO tax calculator

Estimate ordinary income, withholding and FICA when you exercise non-qualified stock options.

Spread (ordinary income)$50,000
Federal (22% supplemental)$11,000
State$5,115
FICA (SS + Medicare)$1,175
Total tax$17,290
Net benefit$32,710

How NSO taxes work

Non-qualified stock options (NSOs) are the most common form of employee stock option. When you exercise, the difference between the fair market value and your strike price - the spread - is treated as ordinary compensation income in that year. Your employer withholds federal tax (usually at the 22% supplemental rate), state tax, and FICA, just like a bonus.

What this calculator estimates

Enter your strike price, the current fair market value, the number of shares, your state, and the wages you have already earned this year. The tool shows the spread, the federal, state and FICA withholding, the total tax, and your net benefit from exercising.

NSOs vs ISOs

The key difference from incentive stock options is simplicity: NSOs have no AMT preference item. The spread is just ordinary income. The downside is you cannot get the favorable all-capital-gains treatment that a qualifying ISO can, so the tax at exercise is often higher. If you hold both, it is worth modeling the ISO side separately because its AMT can dominate your planning in a year you exercise.

Frequently asked questions

How are NSOs taxed?
When you exercise non-qualified stock options, the spread between the fair market value and your strike price is ordinary income in that year, subject to income tax withholding and FICA. Unlike ISOs, there is no AMT preference item.
Do NSOs trigger AMT?
No. NSO exercises are taxed under the regular system as ordinary income. That makes them simpler than ISOs, though the tax bill at exercise can still be large.
What happens when I later sell NSO shares?
Your cost basis is the fair market value at exercise. Any further gain or loss between exercise and sale is a capital gain or loss.

Last reviewed January 2026. This calculator provides general educational estimates based on the inputs you enter and simplified assumptions. It is not financial, tax, legal or investment advice, and figures may differ from your actual liability. Verify with a licensed CPA or financial advisor before acting.