Equity Compensation & Stock Option Valuer
Model vesting timelines, calculate exercise costs, and simulate tax liabilities for tech and startup stock grants (ISOs, NSOs, and RSUs).
Vesting & Tax Realization Schedule
| Year | Shares Vested | Cumulative Vested | Pre-Tax Value | Exercise Cost | Net Profit | Cumulative Net Profit |
|---|---|---|---|---|---|---|
| 1 | 2,500 | 2,500 | $31,250.00 | $6,250.00 | $25,000.00 | $25,000.00 |
| 2 | 2,500 | 5,000 | $31,250.00 | $6,250.00 | $25,000.00 | $50,000.00 |
| 3 | 2,500 | 7,500 | $31,250.00 | $6,250.00 | $25,000.00 | $75,000.00 |
| 4 | 2,500 | 10,000 | $31,250.00 | $6,250.00 | $25,000.00 | $100,000.00 |
Understanding ISO Qualifying Dispositions
Incentive Stock Options (ISOs) are highly tax-efficient if you meet the statutory holding requirements (held 1 year after exercise, 2 years after grant):
Taxed at the lower capital gains rate (e.g. 15% or 20%) on the entire spread from strike to final sale price.
If sold early, the spread between strike and exercise price is taxed at higher ordinary income rates.
For example, with 10,000 ISOs at a $2.50 strike and $15.00 exit: a qualifying sale triggers capital gains taxes resulting in a net profit of $100,000.00. Selling immediately triggers ordinary income taxes, raising your tax bill and lowering profits.
Frequently asked questions
What is the difference between ISOs and NSOs?
Incentive Stock Options (ISOs) are eligible for favorable tax treatment where you pay no tax at exercise (except potential AMT) and pay long-term capital gains at sale if held long enough. Non-qualified Stock Options (NSOs) trigger ordinary income tax on the spread (market price minus strike price) at exercise.
How are RSUs taxed compared to stock options?
Restricted Stock Units (RSUs) are taxed as ordinary income at the moment they vest, based on the stock's market value. With stock options, you only pay tax when you choose to exercise them (and later sell them), giving you more timing control.
What holding period is required for ISO tax advantages?
To qualify for long-term capital gains tax treatment on ISO profits, you must hold the shares for at least 1 year after you exercise the options and 2 years after the original option grant date.