RSUs vs. ISO vs. NSO: How to Compare Your Equity Compensation

Two job offers can look alike until you reach the equity line. One grants 2,000 RSUs. The other grants 6,000 stock options. Which is worth more depends on details the offer letter doesn’t spell out.

Restricted stock units (RSUs), incentive stock options (ISOs), and non-qualified stock options (NSOs) are the three kinds of equity I see most in client pay packages. They differ in what you receive, what you pay, when you owe tax, and what happens if the stock drops.

This guide compares them side by side so you can judge an offer, or the grants you already hold, on equal terms.

If you’re new to equity, our guide to equity compensation covers the basics first.

The Three Types in Brief

RSUs

An RSU is a promise of company shares once you meet a vesting schedule. You pay nothing. At vesting, the shares are yours, and their market value that day counts as ordinary income. For tax purposes, an RSU works like a cash bonus paid in stock.

NSOs

A non-qualified stock option gives you the right to buy shares at a set strike price. You profit only if the stock rises above that price. When you exercise, the spread between the strike price and the market value counts as ordinary income. Companies can grant NSOs to employees, board members, and consultants.

ISOs

An incentive stock option also lets you buy shares at a set price, but it can earn better tax treatment. You owe no regular income tax when you exercise. If you hold the shares at least two years from the grant date and one year from exercise, the whole gain is taxed as a long-term capital gain. Only employees can receive ISOs.

Side-by-Side Comparison

Feature	RSUs	ISOs	NSOs
What you receive	Shares at vesting	Right to buy shares	Right to buy shares
What you pay	Nothing	Strike price at exercise	Strike price at exercise
When you owe tax	At vesting	At sale (AMT possible at exercise)	At exercise, then at sale
How the gain is taxed	Ordinary income at vesting, capital gains after	Long-term capital gains if holding rules are met	Ordinary income on the spread, capital gains after
If the stock falls	Worth less, but still worth something	Worthless below the strike price	Worthless below the strike price
If you leave	Unvested shares are usually forfeited	Exercise window is often 90 days; after 3 months, taxed as NSOs	Exercise window is often 90 days

How to Compare the Value of an Offer

The biggest difference between RSUs and options shows up when the stock price moves. An RSU keeps value unless the stock goes to zero. An option only has value above its strike price.

Take a simple case. One offer grants 1,000 RSUs on a stock trading at $50. Another grants 3,000 options with a $50 strike price. If the stock rises to $60, the RSUs are worth $60,000 and the options are worth $30,000. If the stock falls to $40, the RSUs are still worth $40,000 and the options are worth nothing.

In this example, the options come out ahead only if the stock climbs past $75 a share. That’s why companies grant more options than RSUs for the same pay level, and why options suit people who believe strongly in the company and can afford to be wrong.

A few details in the grant agreement change the math, so ask for them before you accept an offer.

• The strike price for options and, at a private company, the current 409A value

• The vesting schedule, including any cliff

• Whether RSUs are single-trigger or double-trigger, meaning they also require a sale or IPO to vest

• How long you’d have to exercise options after leaving

• Whether early exercise is allowed

• At a private company, the total number of shares outstanding, so you can see what percentage of the company your grant represents

Tax Planning for RSUs

The withholding gap

Most companies withhold federal tax on vested RSUs at a flat 22% for the first $1 million of supplemental income each year. If your bracket is higher, you’ll owe the rest when you file. Raising your paycheck withholding, making estimated payments, or setting cash aside after each vest keeps that bill from surprising you.

Holding vs. selling at vest

Once RSUs vest, holding them is the same as taking a cash bonus and buying company stock. Many people sell right away for that reason. Selling at vesting adds little or no extra tax, since your cost basis equals the value you were just taxed on.

What about options?

Options need more planning, because you choose when to exercise and that choice sets the tax year. NSO exercises can be spread across years to manage your bracket. ISO exercises can trigger the alternative minimum tax, which now reaches more high earners than it did before 2026. Our ISO vs. NSO guide walks through exercise timing and the current AMT numbers in detail.

Don’t Overlook Concentration Risk

Every type of equity adds to the same risk. Your salary, your benefits, and a growing share of your savings all depend on one company. If it struggles, you can lose portfolio value and your job at the same time.

Long-term data on single stocks is humbling. One widely cited study of U.S. stocks found that roughly 40% fell 70% or more from their peak and never recovered. Companies that look strong today are not exempt.

Selling on a schedule, such as at every vest or once a position passes a set share of your net worth, takes emotion out of the decision. Our framework for deciding when to sell company stock can help you set those rules.

What You’re Probably Wondering about You're Equity Compensation

Are RSUs better than stock options?

RSUs carry less risk because they keep value unless the stock goes to zero. Options offer more upside if the stock rises a lot and nothing if it doesn’t. Which is better depends on the company’s prospects, your other assets, and how much risk you can take.

Do I owe tax when my equity is granted?

Usually not. RSUs are taxed at vesting, and options are taxed at exercise or sale. The main exception is restricted stock with an 83(b) election, where you choose to pay tax at grant.

What happens to my equity if I leave my job?

You usually forfeit unvested RSUs and options. Vested options typically must be exercised within 90 days, though some companies allow longer. ISOs exercised more than three months after you leave are taxed as NSOs.

Do RSUs pay dividends?

Unvested RSUs aren’t shares yet, so they don’t receive dividends directly. Some companies pay dividend equivalents, which are credited as cash or extra units and taxed as income. Once RSUs vest and you hold the shares, you receive dividends like any other shareholder.

How do I value options at a private company?

Start with the strike price and the latest 409A value, then ask what percentage of the company your grant represents. Keep in mind that the share price investors paid in the last funding round is often higher than the 409A value, and neither is a price you can sell at today.

Get a Second Set of Eyes on Your Grants

The right way to handle RSUs, ISOs, or NSOs depends on your tax bracket, how much company stock you already own, and when you’ll need the money. Those pieces are easier to weigh together than one at a time.

At Life Story Financial, I help women compare job offers, plan option exercises, and build a selling strategy for company stock that fits the rest of their plan. If you’d like help with your grants, book a free intro call or learn more about the Grow Your Wealth Plan.