Equity comp is the most life-changing — and most badly explained — part of working at a startup or tech company. Pick the wrong exercise strategy and you can write a five- or six-figure check to the IRS for stock that's already worth less than the tax bill. This calculator runs the math so you don't.
The headline number — "you have $5M in vested ISOs!" — is almost always wrong. What you actually have is a tax-and-timing puzzle where the right answer depends on five moving variables: your strike price, the current fair market value (409A or last 409A), your other income, your state, and your liquidity to pay the AMT bill if you exercise early.
The IRS doesn't care that the stock is illiquid. They care that you exercised. The tax is due whether or not you ever sell.
Get this wrong and you're the founder who exercised a million dollars of ISOs in 2021, owed $300K in AMT, and watched the stock drop 70% before you could sell. It happens every cycle. The fix isn't never exercising — it's running the math, sizing the risk, and exercising the amount you can absorb if the stock goes to zero.
ISOs: No regular tax at exercise, but the spread (FMV − strike) hits AMT. Hold 2 years from grant + 1 year from exercise for long-term capital gains treatment on the full upside. The "early exercise + 83(b)" play (when you're allowed) can collapse AMT to near zero if exercised right at grant.
NSOs: Spread is taxed as ordinary income at exercise, plus payroll tax. No AMT trap, but no preferential treatment either. Simpler — and usually worse, tax-wise, than ISOs.
RSUs: Taxed as ordinary income at vest, like a cash bonus. The company usually withholds at 22% federal, which is almost always too low if you're over the $200K mark. Plan for a quarterly estimated tax payment after big vests.
ESPP: If your plan has a discount + lookback feature, the participation rate decision is rarely close — participate at the max, sell same-day. The discount alone usually beats your hurdle rate.
The math above is for a single exercise or vesting event, one year. Real equity-comp optimization is a multi-year, multi-variable problem — which is why most founders and executives sitting on serious equity end up writing checks to the IRS they didn't have to write. The calculator deliberately doesn't model:
AMT carryforward credit. Paid AMT often comes back as a credit against regular tax in later years. Modeling that determines whether early ISO exercise is a real cost or a timing wash.
Tranche sizing across years. When to exercise 20% vs. 50% vs. 100% of vested ISOs to stay below AMT cliffs and the 32%/35%/37% bracket thresholds — and how to spread NSO exercises across calendar years to keep marginal rates down.
83(b) early exercise. If your company allows it, exercising at grant can collapse AMT to near zero. The tradeoffs are real and one-time.
State residency planning. Move from CA to TX before exercising and the tax bill changes by 13.3%. The timing matters more than most people think.
Concentration risk sizing. The biggest decision — usually not modeled by any calculator. How much equity can you absorb if the stock goes to zero? That's the number that determines how much to exercise, not the tax math.
Coordination with the rest of your plan. Tax-loss harvesting offsets, charitable giving timing, retirement contributions, deferred comp — the optimization improves when these move together.
The calculator gives you a directional read. The planning conversation turns it into a real strategy.
And one more thing the calculator can't see: you. How you'll actually behave when the stock doubles, or halves, between vest and exercise. That's the half of equity-comp planning nobody talks about — and it's why the Da Vinci Index™ exists. Most people exercise too early or too late not because the math is wrong, but because their psychology and their plan never met. A fee-only fiduciary's job is to keep both pointed at the same goal.
If you're sitting on six or seven figures of unvested or unexercised equity, this is exactly the kind of question a Modular Planning engagement is built for. No commissions, no products — just fiduciary advice that aligns the tax math with your behavior and your life.