Your ISO Exercise Details
Most recent 409A valuation or public market price.
Your ISO/AMT Breakdown
AMT applies because tentative minimum tax exceeds regular tax. You owe the difference.
AMT Crossover Point
This is the maximum dollar amount of ISO spread you can take this year without owing AMT. Any spread above this triggers AMT.
⚠️ California also has its own AMT (~7%, separate from federal). This calculator shows federal AMT only — your CA tax bill may be higher.
Equity compensation? Run it through the right calculator.
RSUs, ISOs, and stock sales are taxed differently. Pick the tool that matches your event.
RSU Calculator
Vest income + sell-to-cover shortfall + capital-gains projection if you hold.
Calculate RSU vestCapital Gains Calculator
LTCG vs STCG, NIIT 3.8% surtax, and state tax on stock/crypto/RE sales.
Calculate gains taxStock-Comp Tax Guide
RSU vs NSO vs ISO vs capital gains — how each is taxed in plain English.
Read the guideHow ISO/AMT Works in 2026
Incentive Stock Options (ISOs) are a popular form of equity compensation, especially at venture-backed startups. Unlike NSOs, ISOs have a unique tax structure: at exercise, no regular income tax or FICA is owed — but the spread (FMV − strike) is an Alternative Minimum Tax (AMT) preference item.
AMT is a parallel tax system designed to ensure high earners pay a minimum amount. You compute your tax two ways — regular brackets and AMT — and pay whichever is higher. For 2026, the AMT exemption is $90,100 (single) / $140,200 (MFJ), with a phaseout that begins at $500,000 (single) / $1,000,000 (MFJ) — exemption is reduced by 50¢ per $1 of AMTI over the threshold (OBBBA 2025 doubled the rate from 25¢ and dropped the thresholds substantially).
AMT rates are 26% on the first $244,500 of AMT taxable income above the exemption, and 28% on amounts above. The good news: AMT paid generates a credit (Form 8801) that you can use in future years when your regular tax exceeds your tentative minimum tax — so AMT is often a timing issue rather than a permanent loss, especially if you hold the shares long-term.
Disposition timing matters. To get long-term capital-gains treatment on the spread, you must hold the shares for more than 2 years from grant AND more than 1 year from exercise (a qualifying disposition). Selling early is a disqualifying disposition: the spread is reclassified as ordinary income, which usually eliminates the AMT but can result in a higher overall tax bill if the spread is large.
Source: IRS Rev. Proc. 2025-32 (with OBBBA 2025 amendments to §55–§59 phaseout).
See the full Alternative Minimum Tax (AMT) guide → (plain-English mechanics, all common triggers beyond ISOs, the AMT credit explainer, $200K + $950K ISO worked example).
Got RSUs vesting or NSOs to exercise? Use our RSU calculator → or stock-comp tax guide →
Frequently Asked Questions
Do I owe AMT every time I exercise ISOs?
Not necessarily. AMT only applies if your tentative minimum tax exceeds your regular tax. The exemption ($90,100 single / $140,200 MFJ for 2026) shields a significant amount of AMT preference income. Small exercises often stay below the crossover point, especially for filers with moderate W-2 income. Use the 'AMT Crossover Point' output to estimate the maximum exercise size that keeps you AMT-free this year.
What is the AMT credit and how do I get it back?
When you pay AMT due to ISO exercise, the IRS gives you an AMT credit (Minimum Tax Credit) on Form 8801. In future years, when your regular tax exceeds your tentative minimum tax, you can use the credit to reduce your regular tax — dollar for dollar — until the credit is used up. The credit doesn't expire. So if you hold the shares long-term and sell at a profit later, AMT often functions as a timing/cash-flow problem rather than a permanent extra tax.
Should I do a same-day sale or hold ISO shares for the qualifying period?
It depends on your tax bracket, the spread size, and your tolerance for the stock dropping. A same-day sale (disqualifying disposition) converts the spread to ordinary income, eliminating AMT but taxing the spread at your marginal rate (up to 37%). Holding for the qualifying period (>2 yr grant, >1 yr exercise) gives long-term capital gains rates (0/15/20%) on appreciation — but you pay AMT now and risk the stock falling below your strike (a 'phantom income' nightmare). Many advisors recommend exercising annually up to the crossover point to spread AMT exposure.
Does California have its own AMT on ISO exercises?
Yes. California assesses a state AMT separately from federal AMT, with its own exemption (~$95K single 2024) and a 7% rate on AMT taxable income. If you live in CA at exercise, you may owe both federal AMT and CA AMT on the same spread. This calculator computes federal AMT only — consult a CA-licensed CPA for state AMT planning.
What happens if the stock drops after I exercise?
This is the 'AMT trap.' If you exercised when FMV was high but the company's value dropped, you could owe AMT on a paper gain that no longer exists. Options: (1) Sell in the same calendar year as exercise — this converts to a disqualifying disposition and usually eliminates AMT; (2) If the year has already closed, claim the AMT credit in future years; (3) For private company stock, document the FMV decline carefully (a 'nonrecognition' election may help in extreme cases). Pre-exercise: never exercise more than you can afford to pay AMT on, even if the stock value falls to zero.