Calculator
ISO AMT calculator
Exercising incentive stock options and holding the shares triggers no regular income tax, but the spread between strike and value counts for the alternative minimum tax. This calculator estimates the AMT you would owe, how many options you can exercise this year without triggering it, and what a same-day sale would cost instead.
This calculator runs in your browser and needs JavaScript. With scripts off you can still read the explanation below, which walks through the same maths by hand.
Running these numbers for a real decision? The calculator shows the mechanics. It cannot see your full return, your other income, or your state’s quirks. Before you act on a large vest, exercise or conversion, have a CPA or a fee-only advisor who works with equity compensation check the figures. Find a fee-only adviser near you or get matched.
How ISOs and the AMT interact
When you exercise an ISO and keep the shares, nothing appears on your W-2. For regular tax purposes the bargain element, the current value minus the strike price, is not income until you sell. Sell more than one year after exercise and two years after grant and the entire gain from your strike price is a long-term capital gain. That is the ISO benefit, and it can be large.
The alternative minimum tax is a parallel calculation that adds the bargain element back as income. You compute alternative minimum taxable income (AMTI), subtract an exemption that phases out at higher incomes, apply 26% and 28% rates, and pay whichever is greater: the regular tax or this tentative minimum tax. For most tech employees the only reason the AMT ever applies is an ISO exercise.
The AMT is mostly a prepayment
AMT paid because of ISOs creates a minimum tax credit (Form 8801). In later years, when your tentative minimum tax falls below your regular tax, the credit offsets regular tax until it is used up. When you eventually sell the shares, your AMT basis is the exercise-date value, so the AMT gain is smaller than the regular gain, which accelerates the recovery. The cash-flow problem is real, the permanent cost usually is not.
Exercising up to the crossover
Because the tentative minimum tax rises with every share exercised while your regular tax does not, there is a number of shares at which the two are equal. Below it you pay no AMT; above it every additional dollar of spread costs roughly 26 to 28 cents of AMT this year. Exercising up to that crossover each year, especially in years with lower income, is the standard way to start the long-term holding clock without a surprise bill. The calculator reports the crossover as “shares you can exercise AMT-free”.
The same-day sale alternative
If you exercise and sell within the same year, the sale is a disqualifying disposition: the spread becomes ordinary income taxed at your marginal rate (no payroll tax), there is no AMT, and no shares are held. The cashless exercise guide covers when that trade-off is sensible, typically when you could not afford the strike price or would not choose to hold the stock anyway.
Worked example
| Input | Value |
|---|---|
| Exercise | 5,000 ISOs at $2.50 strike, $12 value: $47,500 bargain element |
| Other income | $220,000, single filer |
| Regular tax | Unchanged by the exercise |
| Tentative minimum tax | Rises with the $47,500 added to AMTI |
| Result | Whether any AMT is due depends on how close regular tax already is to the tentative minimum; the calculator shows both figures |
Assumptions and limits
- Uses the current-year AMT exemption, phase-out threshold and rate, federal brackets and standard deduction. The standard deduction is not allowed for AMT, so AMTI equals other income plus the bargain element.
- Assumes no itemised deductions, no other AMT adjustments or preferences, and no capital gains in the year.
- Most states follow federal ISO treatment and tax nothing at exercise. California has its own 7% AMT on the spread, which the calculator does not model.
- Private-company values come from the latest 409A appraisal; a stale appraisal understates the spread.
Frequently asked questions
What is the $100,000 ISO limit?
Options first exercisable in a calendar year with a combined grant-date value above $100,000 are treated as non-qualified options for the excess. Your grant paperwork identifies which options are ISOs.
Does an 83(b) election help?
Only if your plan allows early exercise of unvested options. Exercising before the spread exists and filing an 83(b) within 30 days means no AMT adjustment at all. See the private-company equity guide.
What if the stock falls after I exercise?
You will have paid AMT on a spread that no longer exists. Selling in the same calendar year as the exercise converts it to a disqualifying disposition and eliminates the AMT on those shares, which is why many people exercise early in the year and reassess in December.