Same numbers, different tax
ISOs reward patience with the qualifying disposition rules. NSOs front-load the ordinary-income hit. Set both side by side.
Try it: ISO vs NSO outcome, same numbers
Assumes ISO qualifying disposition (held 1+ year post-exercise and 2+ years post-grant). NSOs front-load the ordinary-income hit at exercise.
ISO (qualifying disposition)
Higher netCash to exercise$2,000
AMT exposure at exercise$8,000
Tax at sale (LTCG)$7,200
Net proceeds$40,800
NSO
Cash to exercise$2,000
Ordinary tax at exercise$2,800
LTCG on post-exercise growth$6,000
Net proceeds$39,200
Quick check