2026 educational tax estimate
2026 NSO Exercise Tax Calculator
Estimate compensation income, payroll tax, withholding, cash exercise cost, adjusted stock basis, and later capital gain.
Calculation methodology reviewed by Carina Luo, CPA
Based on 2026 federal tax rules. Last reviewed July 2026.
Direct answer
For a typical NSO without a readily determinable value at grant, the exercise spread is generally wage income when exercised. It is subject to federal and state income tax and payroll tax. The exercise-date FMV generally becomes the stock basis for a later sale.
Your inputs
Quick estimate
2026
Estimated exercise impact
Estimated exercise and tax cash needed
$77,875
Net of estimated federal and payroll withholding; no state withholding assumed.
W-2 compensation income
$125,000
Strike-price cash
$50,000
Estimated total incremental tax
$58,313
Federal withholding gap
$16,250
Basis per share
$35.00
Total basis
$175,000
Educational estimate only, not tax advice. Final results depend on full income, deductions, residency, prior returns, and transaction records.
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How the estimate works
Compensation income equals shares multiplied by exercise-date FMV minus strike price. Federal income tax is calculated incrementally using 2026 brackets; payroll tax follows the 2026 Social Security wage base and Medicare thresholds. The stock basis after exercise is exercise-date FMV plus any exercise costs included in basis.
Important limitations
- Private-company valuation, early-exercise restrictions, and Section 83(b) elections can change timing and treatment.
- The employer's actual withholding method may differ from the rate entered.
Frequently asked questions
Do NSOs trigger AMT?
The typical NSO exercise is taxed as compensation rather than through the ISO AMT preference.
What is the basis after exercise?
It is generally the exercise-date FMV because the spread has already been included in compensation income.
What happens when I sell later?
The difference between sale price and exercise-date basis is generally capital gain or loss.