Why can’t I compare startup ISOs like public-company RSUs?
By Kyu-Hun Lee · Published · Updated
Short answer: An ISO is an option to buy shares at an exercise price; an RSU is a different award with its own vesting and settlement conditions. Options can require cash to exercise, may not be sellable and can create tax consequences before liquidity. A headline grant value is therefore not equivalent to annual salary or public-company RSUs sold at vest.
Identify what the offer actually grants
Ask for the instrument type, share count, exercise price if applicable, vesting schedule and treatment on leaving the company. For options, also ask about the exercise window after termination. Do not infer the instrument from a recruiter’s use of the word equity.
Compare the documents rather than the headline valuation. A preferred financing-round share price, a common-stock valuation and an option’s exercise price are different concepts. None alone tells you what you can sell the award for today. A private-company award may have no available sale route.
The tax events differ
The IRS explains that statutory stock options generally do not create regular gross income at grant or exercise, but exercising an ISO may create an alternative minimum tax adjustment. Sale timing and qualifying-disposition requirements matter. Nonstatutory options follow different rules; for many such options, exercise produces compensation based on the spread.
These mechanics differ from the simple case of a public-company RSU that settles at vest and is sold immediately. Treating an option’s notional value as annual RSU wages skips exercise cost, liquidity and possible AMT. TrueTaxCalc’s offer comparison does not model ISO exercises, NSO exercises, ESPP sales or AMT.
Sources: IRS Topic 427: Stock options
Make a cash comparison before evaluating speculative upside
Compare the offers using salary and realistic cash bonus first, with startup equity set to zero in the spendable-income model. This does not claim the equity is worthless; it prevents uncertain future proceeds from being used to fund a present-day budget.
Then evaluate the equity separately using multiple outcomes, including one where there is no liquidity. Estimate the cash you might need to exercise, what information you would need for a tax calculation and whether losing that cash would affect essential expenses. Seek award-specific advice before exercising rather than after a deadline has passed.
- Cash needed to exercise and potential tax funding.
- Liquidity restrictions and possible sale routes.
- Vesting, termination and exercise deadlines.
- A downside outcome with no proceeds.
Put your own offer into the comparison
Separate recurring salary, bonus and sellable RSUs from a signing payment and moving costs. Change the assumptions and download a free report.
Compare my offersCommon questions
Can I enter a startup option grant in the RSU field?
No. That field assumes annual wage value from sellable RSUs sold at vest. Options need a different calculation.
Does exercising an ISO always cause AMT?
No. It can create an AMT adjustment, but whether tax is due depends on your full circumstances. The current tool does not calculate AMT.
Sources and scope
Source links checked September 24, 2026. Check the year displayed on tax forms; some sources explain general rules using prior-year examples. These guides are educational and have not been independently reviewed by a tax professional. Our calculator supports a narrower set of scenarios than the rules discussed here. Read the model’s scope.