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Uses published U.S. federal parameters for the selected filing year.
Choose the status expected on the federal return for this event year.
Use one vest or exercise lot at a time.
shares
For RSUs this sets vest income and basis; for options it sets the exercise spread.
$
An out-of-the-money option has no positive exercise spread in this model.
$
Unsold ISO exercise shares can retain an AMT preference.
shares
Used to estimate sale proceeds and any residual capital gain or loss.
$
Use long-term only when the sold lot's holding period supports it.
Use taxable income after deductions; actual MAGI and AMTI can differ.
$
Payroll tax is modeled for RSU and NSO wage compensation only.
$
Withholding is a payment credit, not the final tax liability.
Use the rate shown by payroll or the equity platform.
%
Confirm actual MAGI and net investment income on the return.
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Neutral default: $0.
$YTD
Neutral default: 0%.
%
Neutral default: 0%.
%
Neutral default: 0%.
%
Neutral default: $0.
$
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Equity compensation can create taxable income before it creates spendable cash. Restricted stock units generally become wage income when they vest, nonstatutory stock options can create wage income at exercise, and incentive stock options may create an alternative minimum tax adjustment even when no shares are sold. The event type therefore changes both the tax character and the money needed to complete the transaction.

Three values carry most of the calculation. Fair market value at vest or exercise sets compensation or option spread. Strike price sets the cash exercise cost and part of the share basis. Sale price determines proceeds and any gain or loss after that basis. Using dates or prices from different lots can produce a plausible-looking result for the wrong event.

ConceptWhy it mattersCommon source
Ordinary compensationStacks on other taxable income and may also carry payroll taxVest or exercise statement and Form W-2
Regular tax basisPrevents the same value from being taxed again when shares are soldBroker basis records, adjusted when needed
Capital gain or lossSale proceeds minus the applicable basisTrade confirmation and holding-period records
WithholdingA payment toward tax, not a calculation of final liabilityPayroll or equity-platform statement
AMT preferenceHeld ISO spread can increase alternative minimum taxable incomeForm 3921 and exercise records

A same-day sale may fund taxes and exercise cost, while an exercise-and-hold transaction may require cash with no sale proceeds. Withholding can also fall below the incremental tax caused by the event because the flat supplemental rate does not necessarily match the taxpayer's marginal rate. The useful planning question is therefore not only total tax, but also the tax gap, cash gap, and shares that may need to be sold to cover the modeled outflow.

Federal tax depends on the whole return, not one lot. Deductions, other gains and losses, prior AMT, tax credits, payroll from other employers, state rules, and the exact ISO holding periods can materially change the answer. An event estimate should be reconciled with payroll records, brokerage documents, and a qualified tax professional before exercise or sale instructions are placed.

How to Use This Tool:

Model one vest or exercise lot at a time with the tax year and filing status expected for that event.

  1. Choose the Equity event, Tax year, and Filing status. For an ISO sale, confirm whether the statutory holding requirements make it qualifying or disqualifying before selecting the event.
  2. Enter whole Shares vested or exercised, fair market value at vest or exercise, strike price for options, and the shares and price sold now. Shares sold cannot exceed the event share count.
  3. Enter Other taxable income / MAGI proxy, year-to-date Social Security wages, and the actual federal withholding method. Enable NIIT only as a rough check, because taxable income is not necessarily modified adjusted gross income.
  4. Open Advanced for prior supplemental wages, user-supplied state or local rates, and transaction fees. Review Tax ledger, Review findings, and Tax funding together before deciding how many shares to sell.

Interpreting Results:

Total tax is the modeled incremental federal ordinary tax, long-term capital-gain tax, employee payroll tax, optional state amounts, optional net investment income tax, and isolated ISO AMT exposure. Total withheld is a payment credit. A positive Tax gap means modeled tax exceeds modeled withholding; a negative value is a withholding cushion.

Cash gap is more restrictive than the tax gap. It also includes current exercise cost and transaction fees, then subtracts withholding and sale proceeds. Net cash after tax can be negative even when the award has substantial paper value. The suggested sell-to-cover count is rounded up to a whole share and does not account for price movement or trading restrictions.

Treat every review finding as a prompt to check source documents. A capital-loss finding means the loss is shown but not used to reduce this single-event tax estimate. An ISO AMT finding means the exercise spread entered the preference calculation; it does not establish the final AMT reported on a return.

Technical Details:

The model isolates one U.S. equity event and measures the additional tax against other taxable income. Money is rounded to cents at each named tax component. Positive gains enter the tax calculation; a modeled capital loss is reported and flagged but does not offset other income.

Formula Core

Let N be shares, V fair market value per share, X strike price, Ns shares sold, P sale price, and B regular basis per sold share. The common event quantities are:

Spread per share=max(0,V−X) Sale proceeds=Ns×P Capital gain or loss=Ns×(P−B) Tax gap=Total tax−Total withheld Cash gap=max(0,Tax+Exercise cost+Fees−Withholding−Proceeds)

Rule Core

EventOrdinary incomeRegular basisAMT preference
RSU vest and saleN × VV per sold shareNone
NSO exercise and saleN × max(0, V − X)V per sold shareNone
ISO exercise and holdNone in this regular-tax modelXN × max(0, V − X)
ISO disqualifying saleSold shares × min(exercise spread, positive sale spread)X plus ordinary income per sold shareHeld shares × exercise spread
ISO qualifying saleNoneX per sold shareNone for the modeled sale event

Short-term positive gain is added to ordinary income and taxed incrementally through the selected 2025 or 2026 filing-status brackets. Long-term positive gain is stacked above ordinary income and split across the applicable 0%, 15%, and 20% capital-gain bands. The qualifying-ISO path always treats residual gain as long term; other sale paths use the selected treatment.

Setting20252026Model behavior
Social Security wage base$176,100$184,5006.2% on remaining wage-base room
Medicare1.45%1.45%Applied to modeled RSU and NSO wages without a wage cap
Supplemental withholding22% / 37%22% / 37%22% through $1 million of annual supplemental wages and 37% above it
Additional Medicare0.9%0.9%Applied above the filing-status threshold using entered prior wages
NIIT, when enabled3.8%3.8%Lesser of positive modeled gain or proxy-income excess over the filing threshold

NIIT and Additional Medicare thresholds are $200,000 for single or head of household, $250,000 for married filing jointly, and $125,000 for married filing separately. The NIIT check uses entered taxable income as a simplified MAGI proxy and therefore may differ from Form 8960.

The ISO AMT estimate first reduces the filing-status exemption by 25% of alternative minimum taxable income above its phaseout start, never below zero. Taxable excess is charged at 26% through the selected year's 28% breakpoint and 28% above it. Reported AMT exposure is the increase caused by the modeled ISO preference after isolating any tentative AMT already present without that preference.

Automatic withholding applies only to modeled RSU and NSO wage income. Custom federal and state withholding rates apply to modeled ordinary compensation. State ordinary and capital rates are flat user inputs, not jurisdiction-specific tax-return calculations.

Limitations and Responsible Use:

This is an educational single-event estimate, not tax, legal, investment, or trading advice. It cannot reproduce a complete federal or state return.

  • Other taxable income is used for bracket stacking and as a MAGI and AMTI proxy; actual adjusted income, deductions, credits, and AMT items can differ.
  • Capital losses, wash sales, prior AMT credit, multi-lot basis, employer-specific payroll treatment, and ISO holding-period dates are not fully modeled.
  • Market price, blackout periods, settlement timing, and fractional-share policies can change a sell-to-cover result.
  • Calculations run in the browser, but values may appear in shared links or exports. Treat compensation and income details as sensitive.

Worked Examples:

RSU vest with a same-day sale

For 500 RSUs vested at $42 and sold at $48, vest income is $21,000, regular basis is $42 per share, and sale gain is $3,000. With 2026 single filing status, $165,000 of other taxable income, and automatic supplemental withholding, the reference case estimates $7,366.50 of total tax, $6,226.50 withheld, and a $1,140 tax gap. The sale proceeds prevent a cash gap in that scenario.

ISO exercise with no sale

Exercising 901 ISOs at a $0 strike when fair market value is $100 creates a $90,100 modeled AMT preference and no sale proceeds. In the 2026 single-filer reference case with no other income, that amount reaches the modeled exemption without creating positive isolated AMT exposure. One result at the exemption boundary does not rule out AMT once other income and adjustments are included.

References: