Estimate the Alternative Minimum Tax from exercising ISOs and holding — the cost most planners miss.
About the ISO / AMT calculator
Exercising incentive stock options (ISOs) and holding the shares does not trigger regular income tax, but the bargain element — the spread between your strike price and the shares' fair market value — is a preference item for the Alternative Minimum Tax. If that preference pushes your AMT above your regular tax, you owe the difference. This calculator estimates the AMT you could face, the cash needed to exercise, and the total cost of an exercise-and-hold.
Frequently asked questions
What is the AMT on ISOs?
When you exercise ISOs and hold the shares past year-end, the spread between fair market value and your strike price counts as income for the Alternative Minimum Tax — even though no regular income tax is due. You owe AMT if that preference raises your AMT above your regular tax.
Do I owe AMT if I exercise and sell in the same year?
No AMT preference applies to ISO shares you sell in the same calendar year you exercise. Instead the spread is taxed as ordinary income — that's a disqualifying disposition.
How can I reduce AMT on an ISO exercise?
Common approaches include exercising fewer shares per year to stay under the AMT crossover point, exercising early when the spread is small, or timing exercises across calendar years. This is general information, not tax advice — confirm your situation with a professional.
Is the AMT I pay on ISOs refundable?
AMT paid because of an ISO exercise can generate a minimum-tax credit that you may recover in later years, in which your regular tax exceeds your tentative AMT.