Stock options tax calculator (2026)

In 2026, on a $120,000 Ontario salary, exercising 1,000 options at $10 with shares worth $30 costs $4,341 in total ($2,600 federal tax + $1,741 provincial tax, and no CPP because the annual maximum is already reached on the salary), an effective rate of 21.7%. You keep $15,659 of the $20,000 benefit. You also pay $10,000 to exercise the options and receive shares worth $30,000.

At exercise, not at grant and not at sale. When you exercise, the difference between the fair market value on the exercise date and the exercise price, times the number of shares, is added to your employment income for that year and taxed at your marginal rates. There is normally no tax when the options are granted. If you work for a Canadian-controlled private corporation, the benefit is deferred until the year you sell the shares instead.

A deduction under paragraph 110(1)(d) of the Income Tax Act that cuts the taxable benefit in half, so only half the benefit is taxed. It applies to a qualifying option: the exercise price was at least the fair market value of the shares when the options were granted, you were dealing at arm's length with the employer, and the shares are prescribed (common) shares. An option granted below fair market value can still qualify if the shares are held for at least two years after exercise. In Quebec the provincial deduction is generally 25%, not 50%.

Quebec's higher provincial brackets and smaller deduction mean a bigger bill: on a $120,000 salary, a $20,000 option benefit costs $5,799 in Quebec ($2,171 federal + $3,628 provincial, QPP already at its maximum) versus $4,341 in Ontario, an effective rate of 29.0% instead of 21.7%. You keep $14,201 in Quebec against $15,659 in Ontario. The federal deduction is 50% in both provinces; only the provincial deduction differs (25% in Quebec).

The stock option, on the same value. A qualifying option carries a 50% security options deduction, so only half the benefit is taxed, while an RSU carries no equivalent deduction: the whole vest value is taxed as salary at your full marginal rate. That is why a $20,000 option benefit costs $4,341 in tax on a $120,000 Ontario salary, while a $20,000 RSU vest costs $8,682. This calculator models stock options only; RSUs are taxed in full and are modelled on the RSU tax calculator.

For options granted after June 30, 2021 by a large public company, the 50% deduction is available only on the first $200,000 of grant-date value vesting in a year. Options vesting above that cap in the same year get no deduction, so the full benefit above the cap is taxed. The cap does not apply to options granted by a Canadian-controlled private corporation, or by a company with $500 million or less in annual revenue. This calculator assumes your options qualify for the deduction; if yours vest above the cap, the tax shown is too low.

Only the change since exercise is taxed. Shares kept after exercising have a cost base equal to the value already taxed as employment income, so selling for more produces a capital gain on the growth only, with half of a capital gain taxable, and selling for less produces a capital loss. The gain or loss is not modelled on this page: the capital gains tax calculator shows the tax on a later sale, using the exercise-date value as the cost base. Confirm the cost base with your plan administrator, because broker records can disagree with it.

Not always. Your employer withholds tax when you exercise, but withholding is a prepayment under the payroll tables, not your final tax, and a large exercise can push income into a higher bracket. The calculator above shows the final annual tax, so compare it with what was withheld: on a $75,000 Ontario salary, exercising 250 options at $10 with shares worth $30 costs $882 in total ($472 federal + $210 provincial + $200 CPP), and any shortfall against withholding is a balance owing when you file.