NSO vs RSU: Incentive type comparison

Non-qualified stock options (NSOs) and restricted stock units (RSUs) are two possible incentives, but they behave in no way alike. NSOs let you buy company shares at a set price, and RSUs give you shares outright once they vest.

You probably have many questions about NSOs vs RSUs, such as: Will you need cash to benefit? When will you owe tax? How much depends on the share price?

Here's everything you need to know about how NSOs and RSUs compare.

We'll also introduce the Wise account, which allows you to send, spend, and receive your money across the globe in over 40 currencies – all at the fair mid-market rate.

Learn more 🔎

What are NSOs?

A non-qualified stock option (NSO)¹ gives you the right to buy company shares at a price locked in on your grant date, known as the strike price. NSOs aren't limited to employees, so companies can also grant them to contractors, advisors, and board members.

Their value comes from the difference between your strike price and the price the shares trade at later. If the price climbs above your strike, you can buy in low and keep the difference. If it stays below, there's no reason to exercise.

When you do exercise, the spread between your strike price and the market value is taxed as ordinary income for the year.

What are RSUs?

A restricted stock unit (RSU)² is a grant of company shares you receive once you've earned them, usually by staying through a vesting schedule. There's no purchase and no strike price, so you don't spend any money to get them.

When your RSUs vest, the shares move into your account and are yours to keep or sell. Because each unit turns into an actual share, RSUs hold value for as long as the stock is worth anything, even if the price has slipped since your grant. On the downside, the value of the shares counts as ordinary income the year they vest, whether or not you sell.

NSOs vs RSUs: What are the differences between them?

Both NSOs and RSUs are ways your company shares equity with you, but their logic is different.

An NSO is something you choose to act on by buying shares at a fixed price. An RSU is stock delivered to you once it vests, with no action needed on your part.

What you receive

An NSO doesn't make you a shareholder on its own. It gives you the option to become one by buying shares at your strike price once the options vest. Until you exercise, what you hold is a right, not stock.

An RSU doesn't work like that. Once it vests, the company delivers actual shares to you, and you own them from that moment with nothing to buy.

What it costs you

Turning NSOs into shares means paying the strike price yourself. Depending on that price and how many options you hold, funding it can take a large amount of cash.

With RSUs, there's nothing you need to pay upfront, since the company grants the shares to you directly. Tax may be due when they vest, but you're never paying to acquire the stock.

Control over timing

With NSOs, you decide when to exercise, at any point after they vest and before they expire, which gives you room to plan around your tax year. RSUs have no such lever. They vest on the schedule set in your grant, and the tax arrives that year no matter what.

Risk if the stock drops

NSOs depend on the share price climbing above your strike price. If the stock trades below it, exercising would cost more than the shares are worth, and your options have no practical value until the price recovers.

RSUs hold up better when the market turns. Because each unit becomes a share you own, it keeps some worth for as long as the company's stock is worth anything, even after a steep fall.

What happens if you leave the company

Vested NSOs usually come with a limited window to exercise, often around 90 days from your last day, and anything left unexercised after that expires.¹ With RSUs, shares that have already vested stay yours, but any units still unvested are typically given up when you go.

Let us introduce you to Wise

Send money to 140+ countries with the mid-market exchange rate and low, transparent fees with Wise. Set up a free Wise account online or in the Wise app, to transfer money fast in 40+ currencies.

Over 50% of Wise payments arrive instantly* — and all Wise transfers are deposited directly into your recipient's bank account for convenience.

No ongoing fees, no hidden charges and no hassle — just fast, transparent international transfers that can beat the banks.

Get started with Wise

*Transaction speed claimed depends on funds availability, approval by Wise’s proprietary verification system and systems availability of our partners’ banking system, and may not be available for all transactions.

NSO vs RSU: Tax treatment in the US

NSOs and RSUs are both taxed as ordinary income, so the question isn't the rate you pay. It's when the tax applies and what amount it applies to.

How NSOs are taxed

NSOs are taxed at exercise.

The spread between your strike price and the share value on the day you buy counts as ordinary income, and payroll taxes apply.

From there, the market value at exercise becomes your cost basis. If you hold the shares and later sell for more, that extra gain is a capital gain, taxed at the lower long-term rate once you've held for more than a year.¹

How RSUs are taxed

RSUs are taxed at vesting.

The full value of the shares that day is added to your income for the year, with no way to defer it. Companies typically withhold at a flat 22% supplemental rate on that income, and if you sit in a higher bracket, that withholding won't cover the full bill, so you settle the rest when you file.²

Any growth after vesting is a capital gain when you sell, set by how long you held the shares.

FAQs

Are NSOs or RSUs more valuable?

It depends on the share price and how much risk you want. RSUs are worth something as long as the stock has any value, which makes them the steadier option. NSOs can be worth more if the price rises well above your strike price, since you keep all of that upside, but they can also end up worthless if the price stays low. You have more certainty with RSUs, but more potential with NSOs.

Do I need cash to exercise NSOs?

Usually, yes. Exercising means paying your strike price for each share you buy, so you need the money available. Some companies allow a cashless exercise, where you sell part of the shares right away to cover the cost, but that isn't offered everywhere, and rarely at private companies.

Do NSOs expire?

Yes. NSOs come with an expiration date, commonly up to 10 years from your grant date. Leaving your job usually cuts that down sharply, often to about 90 days to exercise before they lapse. Check your grant agreement for your specific deadlines.¹

Why did my company give me RSUs instead of NSOs?

Company stage is often the reason. Larger and public companies tend to prefer RSUs, which are simpler to run and keep value regardless of the share price. Startups lean toward options like NSOs, where a low strike price can pay off if the company grows.

Are NSOs and RSUs taxed at the same rate?

At the first tax point, yes. Both are taxed as ordinary income, NSOs when you exercise and RSUs when they vest. What is different is the amount taxed: NSOs are taxed on the spread above your strike price, and RSUs are taxed on the full value of the shares.

Later gains on either are taxed as capital gains when you sell.

---

NSOs and RSUs are governed by different rules.

RSUs become shares you own automatically and are taxed at vesting, with dependable value. NSOs give you the right to buy shares at a set price, with more say over timing yet more risk tied to the stock.

If you have questions about any specific case scenarios that apply to your NSOs or RSUs, the most helpful thing you can do is read your grant paperwork closely and talk to a tax advisor before any large exercise or sale.

If you sell and want to move the money to another country, keep in mind that banks often take a slice through transfer fees and marked-up exchange rates. On a large amount, that adds up quickly.

Wise can help you save on fees.

Learn more about Wise

Sources

1. Carta - Non-qualified stock options (NSOs)
2. Carta - Restricted stock units (RSUs)

Sources checked 09/17/2026