ISO AMT
Calculator
Exercising incentive stock options (ISOs) and holding can trigger the Alternative Minimum Tax on the bargain element — even though you haven't sold a share. Estimate your 2026 AMT, and find how many ISOs you can exercise before it kicks in. Nothing saved.
Estimated additional AMT
$12,976
on a $100,000 bargain element
You can exercise about 2,504 shares before AMT kicks in — you entered 5,000.
- Bargain element (AMT preference)
- $100,000
- AMT exemption
- $90,100
- Tentative minimum tax
- $41,574
- Regular tax
- $28,598
Federal only — some states (e.g. California) run their own AMT. A same-year sale (disqualifying disposition) is taxed as ordinary income instead of creating an AMT preference.
Basis · 2026 AMT exemption + 50% phaseout + 26/28% rates (Rev. Proc. 2025-32, OBBBA) · regular tax per 2026 brackets · federal only (some states run their own AMT) · an educational estimate, NOT tax advice.
The short answer
When you exercise incentive stock options (ISOs) and hold the shares, the bargain element — fair market value at exercise minus your strike price, times the number of shares — becomes an Alternative Minimum Tax (AMT) preference. If your tentative minimum tax (26%/28% on AMT income above the 2026 exemption) exceeds your regular tax, you owe the difference as AMT. Exercising fewer shares, or exercising early when the spread is small, can keep you under the AMT 'crossover.'
Common questions
How does AMT work on ISOs?
Exercising ISOs and holding past year-end adds the bargain element (FMV at exercise minus strike, times shares) to your Alternative Minimum Taxable income. If the resulting tentative minimum tax exceeds your regular tax, the difference is AMT you owe — on a gain you haven't sold.
How many ISOs can I exercise without AMT?
Up to the point where your tentative minimum tax equals your regular tax — the AMT 'crossover.' This calculator solves for that breakeven and shows the approximate number of shares you can exercise AMT-free this year.
What is the 2026 AMT exemption?
For 2026 the AMT exemption is $90,100 (single) and $140,200 (married filing jointly), phasing out at 50 cents per dollar of AMT income above $500,000 (single) / $1,000,000 (MFJ) under the OBBBA rules.
Do I pay AMT if I sell ISOs the same year?
No — a same-year sale is a disqualifying disposition, taxed as ordinary income with no AMT preference. AMT applies when you exercise and hold across the calendar year.
Can I get the AMT back later?
Often, yes — AMT paid on an ISO exercise generally creates a minimum tax credit you can use in future years when your regular tax exceeds your tentative minimum tax. It's frequently a timing cost, not a permanent one.
One place for every number, cited.
A calculator answers one question. Formation tracks the whole picture — net worth, equity comp, and taxes across every custodian and entity, each number traceable to its source.