RSU Tax Calculator 2025 (ISO, NSO, AMT) - Free Tool for Tech Employees

RSU vs ISO vs NSO: Which is Best for Tech Employees? [2025 Comparison]

2025 Tax Changes Impacting Tech Equity Compensation

The 2025 tax year brings several important changes that directly affect how your RSUs, ISOs, and NSOs are taxed. Understanding these updates is crucial for accurate tax planning and maximizing your after-tax proceeds from equity compensation.

1. Social Security Wage Base: $176,100 (Up from $168,600)

The Social Security wage base increased by $7,500 in 2025. This means you'll pay 6.2% Social Security tax on the first $176,100 of combined W-2 income and equity compensation (for RSUs and NSOs). For high earners, this translates to a maximum Social Security tax of $10,918 in 2025, compared to $10,453 in 2024—an increase of $465.

Impact for Tech Workers: If your W-2 income already exceeds $176,100, any RSU vesting or NSO exercises won't incur additional Social Security tax. However, if you're close to the threshold, a large vesting event could push you over, triggering SS tax on a portion of your equity compensation.

2. Federal Tax Brackets Adjusted (5.2% Inflation Adjustment)

All federal tax brackets increased by approximately 5.2% for inflation. For single filers, the 24% bracket now applies to income from $100,525 to $191,950 (up from $95,375-$182,100 in 2024). The 32% bracket starts at $191,950 (up from $182,100).

What This Means: More of your income stays in lower tax brackets. If you earned $185,000 in 2024, you would have hit the 32% bracket. In 2025, that same income stays in the 24% bracket, saving you 8 percentage points on ~$3,000 of income ($240 in tax savings).

3. Long-Term Capital Gains Thresholds Raised

The 0% LTCG bracket now extends to $47,025 for single filers (up from $44,625 in 2024). The 15% bracket applies up to $533,400 (up from $492,300). Above that, you pay 20% LTCG rate.

Planning Opportunity: If your total taxable income (including equity gains) falls below $47,025, you pay 0% on long-term capital gains. This is powerful for early retirees or those taking sabbaticals—harvest equity gains tax-free during low-income years.

4. California: 9.3% Bracket Expanded (Tech Worker Sweet Spot)

California's 9.3% marginal tax bracket now applies to income from $68,350 to $349,137 for single filers. Most tech workers with equity compensation fall into this bracket. Combined with federal taxes and FICA, your marginal rate on RSU vesting can easily exceed 40% in California.

5. NIIT Still 3.8% (No Change)

The Net Investment Income Tax remains at 3.8% for modified adjusted gross income above $200,000 (single) or $250,000 (married). This applies to capital gains from selling equity, but NOT to ordinary income from RSU vesting or NSO exercises.

California RSU Tax Calculator [Tech Employee Guide]

California is home to Silicon Valley, San Francisco's tech hub, and the majority of FAANG headquarters. It's also the highest-taxed state in the nation for equity compensation. Understanding California's unique tax treatment of RSUs, ISOs, and NSOs is essential for maximizing your after-tax wealth.

Why California Hurts Most

California's top marginal tax rate is 13.3%, but most tech workers fall into the 9.3% bracket ($68,350-$349,137 for single filers in 2025). Here's what makes California uniquely painful:

• No LTCG preference: California taxes long-term capital gains at the same rate as ordinary income. While the federal government gives you a 15% LTCG rate, California charges the full 9.3% (or 13.3% for high earners). Combined, your total tax on LTCG is 24.3% (15% federal + 9.3% CA), compared to just 15% in a no-tax state like Texas.
• Strict sourcing rules: If you earned equity while working in California, you owe California tax when it vests or when you exercise/sell—even if you've moved to another state. California uses a "time-based allocation" formula: if you worked 2 years in CA and 2 years in Texas before vesting, California taxes 50% of the RSU income.
• High combined rates: With federal (up to 37%), California state (9.3%-13.3%), Social Security (6.2%), Medicare (1.45%), Additional Medicare (0.9% for high earners), and NIIT (3.8% on capital gains), your marginal tax rate on equity compensation can approach or exceed 50%.

California vs No-Tax States: Real Numbers

Let's compare the tax on $40,000 of RSU vesting for a single filer with $150,000 W-2 income:

On $40,000 of RSU vesting, California costs you an extra $3,720 compared to Texas—a 9.3% penalty just for living in CA.

Pro Tip: Move BEFORE Major Vesting Events

Many tech employees strategically relocate to no-tax or low-tax states (Texas, Washington, Florida, Nevada) before large liquidity events (IPO, acquisition, or major vesting cliff). However, California's sourcing rules are strict:

• If you earned the RSUs while living in California, you owe California tax on a pro-rata basis based on how many days you worked in CA during the vesting period.
• For ISOs, California taxes the bargain element at exercise based on the allocation of time worked in CA between grant and exercise.
• You must establish bona fide residency in another state (change driver's license, voter registration, sell/rent CA home, spend <45 days/year in CA, etc.). California aggressively audits these situations.

California-Specific Planning Strategies

1. Exercise ISOs in low-income years: California's AMT exemption phases out at high incomes. If you have a low-income year (sabbatical, between jobs), exercise ISOs to minimize AMT.
2. Harvest losses aggressively: California allows you to offset capital gains with capital losses. If you have losing investments, sell them to offset RSU/ISO gains.
3. Consider Qualified Opportunity Zones (QOZ): Invest capital gains into QOZs to defer and potentially eliminate federal capital gains tax (but not California state tax).
4. Donate appreciated equity: If you have RSUs that appreciated after vesting, donate them to charity. You get a deduction for the full FMV and avoid paying capital gains tax (federal and CA).

State-by-State Equity Tax Rates 2025

State income tax is one of the biggest factors affecting your net proceeds from equity compensation. Here's a comprehensive breakdown of how all 50 states (plus DC) tax RSUs, ISOs, and NSOs in 2025:

Note: Tax rates shown are 2025 top marginal rates. Some states have graduated brackets. Always consult a tax professional for your specific situation.

How to Calculate Your Stock Option or RSU Taxes

Calculating taxes on stock options and RSUs can be complex, but understanding the basics empowers you to make smarter financial decisions. This calculator uses 2025 IRS tax brackets, FICA rates, state tax rates, and special rules for ISOs, NSOs, and RSUs to give you an accurate estimate of your tax liability.

The calculation process varies significantly based on the type of equity compensation you receive. RSUs are taxed as ordinary income at vesting (when you actually receive the shares), plus capital gains tax when you sell. ISOs have special tax treatment that can save you money if you meet holding period requirements, but they may trigger AMT (Alternative Minimum Tax). NSOs are straightforward: you pay ordinary income tax at exercise and capital gains tax at sale.

RSU Taxation in the USA

Restricted Stock Units (RSUs) are the most common form of equity compensation at public companies. When your RSUs vest, you receive actual shares of company stock. At that moment, the IRS considers the fair market value (FMV) of those shares as ordinary income—just like your salary.

Vesting = Ordinary Income

Let's say you receive 1,000 RSUs that vest when the stock price is $50 per share. The IRS treats this as $50,000 of ordinary income, subject to federal income tax (10%-37% depending on your tax bracket), Social Security tax (6.2% up to the wage base of $176,100 in 2025), Medicare tax (1.45% plus 0.9% surtax on high earners), and state income tax.

Most companies automatically withhold shares to cover taxes (called "sell-to-cover"). For example, if your total tax rate is 40%, your company might withhold 400 shares and give you 600 shares. This withholding is reported on your W-2, and you may still owe additional taxes when you file your return if the withholding wasn't enough.

Sale = Capital Gains (STCG/LTCG)

After vesting, you own the shares. When you eventually sell them, you'll owe capital gains tax on any appreciation. Your cost basis is the FMV at vesting (the amount already taxed as ordinary income). If the stock went from $50 at vesting to $75 at sale, you have a $25 per share capital gain.

The key question: did you hold the shares for more than 1 year after vesting? If yes, it's a long-term capital gain (LTCG) taxed at preferential rates (0%, 15%, or 20% depending on income). If no, it's a short-term capital gain (STCG) taxed as ordinary income at your marginal rate (potentially 10%-37%).

LTCG vs STCG: A Real Example

Scenario 1 (STCG): You sell immediately after vesting. Your $25,000 gain is taxed at your ordinary income rate. If you're in the 32% federal bracket plus 9.3% California state tax, you pay about $10,325 in tax (41.3% effective rate) on the gain alone, netting $14,675.

Scenario 2 (LTCG): You hold for 13 months, then sell at the same $75 price. Your $25,000 gain is now taxed at the 15% LTCG rate federally plus 9.3% California (which doesn't distinguish LTCG/STCG), totaling about $6,075 in tax (24.3% effective rate), netting $18,925. You saved $4,250 by waiting!

However, waiting carries market risk. If the stock drops from $75 to $60 during your holding period, you might save on taxes but lose more in stock value. This is why tax planning and portfolio diversification go hand-in-hand.

ISO Taxation: The Tricky World of AMT

Incentive Stock Options (ISOs) are the "luxury car" of equity compensation—potentially tax-efficient, but with hidden costs if you're not careful. ISOs are granted with a strike price (exercise price) and vest over time. Unlike RSUs, you must actively exercise (buy) the shares by paying the strike price.

How ISOs Work (Favorable Treatment)

ISOs have a special tax advantage: if you meet holding period requirements (2 years from grant AND 1 year from exercise), you can treat the entire gain from strike price to sale price as long-term capital gains. No ordinary income tax at all!

Example: You're granted ISOs with a $10 strike price when the stock is worth $10. Three years later, the stock is $50. You exercise (pay $10 per share). Two years after that, you sell at $75. Your total gain of $65 per share is taxed as LTCG (15%-20% federal rate), not ordinary income (potentially 37% federal + state).

For someone in the 35% federal bracket in California (13.3% state), this could mean a 48.3% tax rate vs. a 20% LTCG rate— a savings of 28.3 percentage points! On 10,000 shares with a $65 gain, that's a $183,950 tax savings.

AMT Explanation (26-28% Rates, Bargain Element)

Here's the catch: when you exercise ISOs, the "bargain element" (FMV at exercise minus strike price) is a tax preference item for Alternative Minimum Tax (AMT) purposes. AMT is a parallel tax system designed to ensure high earners pay a minimum amount of tax.

In our example, if you exercise when the stock is $50 (strike price $10), you have a $40 per share bargain element. This $40 gets added to your income for AMT calculation. The AMT rates are 26% on AMT income up to $220,700 and 28% above that (for single filers in 2025). You also get an AMT exemption of $85,700 (single) or $133,300 (married filing jointly), which phases out at higher incomes.

The AMT you pay is the excess of your AMT calculation over your regular tax. If your regular tax is $60,000 and your AMT is $75,000, you owe an additional $15,000 in AMT. The good news: you can carry forward an AMT credit to offset future regular tax (when regular tax exceeds AMT).

Qualifying vs Disqualifying Disposition

A "qualifying disposition" means you held the ISO shares for at least 2 years from the grant date AND 1 year from the exercise date before selling. If you meet both requirements, you get the favorable long-term capital gains treatment on the entire gain.

A "disqualifying disposition" means you sold too early (within 2 years of grant or 1 year of exercise). In this case, the bargain element at exercise is taxed as ordinary income (reported on your W-2), and any gain from exercise to sale is capital gains (short-term or long-term depending on how long you held after exercise).

Example: You exercise ISOs at $10 when FMV is $50, then sell 6 months later at $60. This is disqualifying. You pay ordinary income tax on $40 per share (bargain element) and short-term capital gains on $10 per share (sale gain). Plus, you may have paid AMT at exercise, which you'll need to reconcile.

How to Avoid AMT Surprises

The best way to avoid AMT is careful planning. Here are strategies tech employees use:

• Exercise in January: Gives you 15+ months to see if the stock appreciates before year-end. If it tanks, you can sell before December 31 to trigger a disqualifying disposition and avoid AMT on phantom gains.
• Exercise in tranches: Don't exercise all your ISOs in one year. Spread exercises over multiple years to stay below AMT thresholds.
• Calculate your AMT crossover: Use tax software or a CPA to determine how many ISOs you can exercise before triggering AMT. Exercise up to that point but no further.
• Consider cashless exercise: Exercise-and-sell-immediately is a disqualifying disposition, but you avoid AMT and don't need cash upfront. You lose the LTCG benefit, but you eliminate risk.
• Monitor stock price: If the stock plummets after exercise (but before year-end), consider selling to trigger a disqualifying disposition. This prevents you from paying AMT on income that evaporated.

NSO Taxation

Non-Qualified Stock Options (NSOs) are simpler than ISOs—what you see is what you pay. NSOs don't qualify for special tax treatment, so they're taxed like RSUs at exercise.

Exercise = Immediate W-2 Tax

When you exercise NSOs, the bargain element (FMV at exercise minus strike price) is taxed as ordinary income. Your company reports this on your W-2, and you pay federal income tax (10%-37%), Social Security and Medicare taxes (7.65% combined, with limits), and state income tax.

Example: You exercise 1,000 NSOs with a $10 strike when FMV is $50. Your bargain element is $40,000, reported as W-2 income. If you're in the 24% federal bracket, 6.2% SS, 1.45% Medicare, and 5% state, you pay about $14,660 in taxes. Your company typically withholds this via payroll or requires you to pay cash upfront.

Sale = Capital Gains

After exercise, your cost basis is the FMV at exercise ($50 in our example). If you sell later at $75, you have a $25 capital gain per share. If you held for more than 1 year after exercise, it's LTCG (0%-20% federal rate). If less than 1 year, it's STCG (taxed as ordinary income).

NSOs are popular at private companies because they avoid AMT complications. The downside is higher ordinary income tax at exercise compared to the potential LTCG treatment of ISOs. But for employees at high-growth startups, NSOs often make sense because they offer flexibility and predictability.

State-by-State Tax Guide 2025

State taxes can significantly impact your net proceeds. Some states have no income tax (0% rate), while others have rates exceeding 13%. Here's a breakdown of the top 10 states for tech workers:

California (13.3%)

California has the highest marginal tax rate in the nation. For equity compensation, California taxes ordinary income and capital gains (both LTCG and STCG) at the same rates. If you're in the top bracket ($1M+ income), you'll pay 13.3% state tax. California also has strict sourcing rules: if you earned the equity while working in California, you owe California tax even if you move to another state before vesting or selling. Tech employees often strategize by moving to no-tax states like Nevada or Texas before major liquidity events, but consult a CPA—California aggressively audits these situations.

Washington (0%)

Washington has no state income tax, making it highly attractive for tech workers. Amazon, Microsoft, and other tech giants are headquartered here for this reason. However, Washington does have a 7% capital gains tax on gains exceeding $250,000 (enacted in 2022). This tax is currently being litigated in courts, so consult updated guidance. For most employees, Washington remains extremely tax-friendly.

Texas (0%)

Texas has no state income tax and no capital gains tax. It's a popular destination for remote tech workers and companies relocating from California (e.g., Tesla, Oracle). The tradeoff: higher property taxes (1.8% effective rate) and sales taxes. But for high earners with significant equity compensation, the savings are substantial—potentially $50,000+ per year compared to California.

Massachusetts (5%)

Massachusetts has a flat 5% income tax on most income, including equity compensation and capital gains. It's straightforward and relatively low compared to progressive-tax states. Massachusetts also has a 4% surtax on income above $1 million (approved by voters in 2022), bringing the top rate to 9% for high earners.

New York (10.9%)

New York State has a top rate of 10.9%, and if you live in New York City, add another 3.876% for a combined top rate of 14.776%— higher than California! New York taxes LTCG and STCG the same as ordinary income. The state has strict residency rules: spending 183+ days in New York makes you a statutory resident, subject to tax on all income. Tech workers at NYC offices often move to New Jersey or Connecticut to save on taxes, but be mindful of allocation rules for equity earned while working in NY.

Illinois (4.95%)

Illinois has a flat 4.95% income tax rate, which is moderate and predictable. It taxes ordinary income and capital gains equally. Chicago is a growing tech hub, and the state's flat tax makes planning easier than in progressive-tax states.

Colorado (4.4%)

Colorado has a flat 4.4% income tax rate (reduced from 4.55% in 2020). It's one of the most tax-friendly states with an income tax, making it attractive for remote workers. Colorado taxes LTCG and STCG at the same 4.4% rate.

Arizona (4.5%)

Arizona has a flat 4.5% income tax rate (reduced in 2021). Phoenix is emerging as a tech hub, and the low tax rate is a major draw for California transplants.

North Carolina (4.75%)

North Carolina has a flat 4.75% income tax rate. The Research Triangle (Raleigh-Durham) is a major tech and biotech hub, and the tax rate is competitive. North Carolina taxes LTCG and STCG at the same rate as ordinary income.

Georgia (5.75%)

Georgia has a top marginal rate of 5.75%. Atlanta is a fast-growing tech hub, and the tax rate is moderate. Georgia provides some preferential treatment for retirement income but taxes equity compensation and capital gains as ordinary income.

Tax Minimization Strategies

Smart tax planning can save tens or hundreds of thousands of dollars. Here are proven strategies used by tech employees:

Withholding Optimization

When RSUs vest or you exercise options, your company typically withholds at a flat 22% federal rate (for supplemental wages under $1M). But your actual marginal rate might be 32% or 37%, leaving you with a big tax bill in April. Solution: increase W-4 withholding or make estimated tax payments quarterly to avoid underpayment penalties (safe harbor: 110% of prior year's tax if AGI > $150,000). Alternatively, if you're in a low bracket, you might prefer underwithholding and investing the difference, then paying in April—but only if you avoid penalties.

Timing Strategies

Exercise or sell in a year when your income is lower (e.g., after a job change, during parental leave, or in retirement). This keeps you in lower tax brackets. For ISOs, exercise early in the year (January) so you have 11+ months to monitor the stock before year-end. If it drops, sell before December 31 to avoid AMT on phantom gains.

Loss Harvesting

If you have capital losses elsewhere in your portfolio, you can offset capital gains from equity compensation sales. You can deduct up to $3,000 of net capital losses against ordinary income each year, with the rest carried forward. Example: You have $50,000 in LTCG from RSU sales. You also have $50,000 in losses from a bad investment. You can offset the gains entirely, paying $0 in LTCG tax. This is called tax-loss harvesting and is a cornerstone of smart portfolio management.

Frequently Asked Questions