Calculator inputs
Example data table
| Scenario | Options | Strike | FMV at exercise | Sale price | Estimated net proceeds |
|---|---|---|---|---|---|
| NSO, sell immediately | 1,000 | $2.50 | $8.00 | $10.00 | $4,000.00 |
| ISO, qualifying sale | 1,000 | $2.50 | $8.00 | $12.00 | $7,000.00 |
| ISO, disqualifying sale | 1,000 | $2.50 | $8.00 | $7.00 | $1,500.00 |
Formulas used
- Exercise Cost = Options × Strike
- Spread = Options × max(FMV − Strike, 0)
- NSO Ordinary Income ≈ Spread
- ISO AMT Adjustment ≈ Spread (detailed mode)
- Capital Gain depends on grant and holding period
- Tax = Income × (Rate + State)
- Net Proceeds = Sale − Exercise − Fees − Taxes
- Funding Gap = Needed cash − Sale proceeds (floor at 0)
How to use this calculator
- Select your grant type (ISO or NSO) and your plan action.
- Enter options exercised, strike, and FMV at exercise.
- If selling, enter the sale price and the sale date.
- Set tax rates and fees to match your situation.
- Click Calculate to view results above the form.
- Use Download CSV or Download PDF for records.
Exercise cost and immediate cash impact
Exercise cost equals options multiplied by strike. In the sample default, 1,000 options at $2.50 needs $2,500 cash. Add fees and potential taxes to estimate the funding gap. Include broker charges when comparing alternatives. If your broker supports cashless exercise, proceeds from a same‑day sale can reduce upfront cash needs.
Understanding spread and taxable income
Spread is max(FMV − strike, 0) times options. For NSOs, this spread is commonly treated as ordinary income at exercise. If FMV is $8.00 and strike is $2.50, the spread is $5.50 per option, or $5,500 total for 1,000 options. This value drives withholding and payroll‑style taxes in many plans. Withholding may differ from your marginal rate, affecting refunds later.
ISO timing and qualifying disposition logic
ISOs often depend on holding periods: at least two years from grant and one year from exercise for a qualifying disposition. When dates are provided, the calculator flags qualifying versus disqualifying. Verify holding rules in your grant agreement. Qualifying dispositions typically shift more gain into capital treatment, while disqualifying dispositions can create ordinary income similar to NSOs.
Capital gains: short-term versus long-term outcomes
When shares are sold, capital gain is evaluated using the change from the exercise basis to sale price. The calculator uses exercise‑to‑sale time to classify long‑term (≥1 year) versus short‑term. For example, a $2.00 increase from $8.00 to $10.00 after exercise can become long‑term if sold after one year. Testing multiple sale prices highlights downside risk to net proceeds.
AMT exposure and planning checkpoints
For ISOs, the spread can be an AMT adjustment. In detailed mode, the tool estimates AMT as spread multiplied by your AMT rate input. This is a planning proxy, not a full AMT computation, but it helps compare scenarios: smaller exercises, staged exercises, or exercising earlier when FMV is lower. If AMT is large, test exercising fewer options.
Scenario comparison and export-ready records
Use the sensitivity chart to test how net proceeds move as sale price changes while inputs stay fixed. Adjust rates, fees, and disposition choice, then export CSV or PDF for review. For many employees, the highest‑value insight is not the headline profit, but the cash timing and the tax-driven difference between selling now and holding.
FAQs
1) What is the difference between ISO and NSO in this tool?
NSOs treat the exercise spread as ordinary income in the estimate. ISOs may avoid regular tax at exercise but can create an AMT adjustment and different sale outcomes based on holding periods.
2) Why does “Hold shares” show negative net proceeds?
Holding means you pay the exercise cost now and do not receive sale proceeds yet. The net value shown is the immediate cash impact, useful for budgeting and liquidity planning.
3) How does withholding affect the results?
Withholding reduces the estimated cash taxes due at settlement by subtracting an estimated withheld amount. Actual withholding can vary by payroll rules, broker method, and jurisdiction.
4) What does the funding gap represent?
Funding gap is the extra cash needed after considering sale proceeds and your available cash input. It helps you anticipate whether you must add cash or reduce exercised shares.
5) Is the AMT estimate a complete AMT calculation?
No. It is a simplified proxy using spread and your AMT rate input. Real AMT depends on deductions, exemptions, and other income items, so consult a qualified tax professional.
6) Can I use this for countries outside the United States?
You can model cash flows, but tax logic is US‑oriented. For non‑US plans, use local tax rates as placeholders and treat results as directional planning, not compliance output.