Why do ISOs trigger AMT?

The spread between fair market value and exercise price at ISO exercise is an AMT preference item. This can cause significant AMT even when no regular income tax is owed.

What is a disqualifying disposition?

Selling ISO shares within 2 years from grant date or 1 year from exercise date. A disqualifying disposition converts the gain to ordinary income, but eliminates the AMT preference item.

How can I minimize ISO AMT?

Exercise early in the year to have more time to assess stock value before tax year-end. Monitor AMT crossover point and exercise only to the point where AMT equals regular tax.

What is the AMT credit for ISO exercises?

When you exercise ISOs and pay AMT, you earn a minimum tax credit that can offset future regular tax. The credit is available in years when regular tax exceeds tentative minimum tax.

How are NSOs different from ISOs for tax purposes?

NSO spread at exercise is ordinary income and wages subject to FICA withholding; no AMT issue. ISO: no income at exercise for regular tax; AMT preference item on spread.

US AMT and Incentive Stock Option (ISO) Tax Calculator

Calculate AMT impact of exercising Incentive Stock Options. ISO spread (FMV minus exercise price) is an AMT preference item. Strategies: exercise early in year, track AMT crossover point, disqualifying dispositions.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate AMT impact of exercising Incentive Stock Options. ISO spread (FMV minus exercise price) is an AMT preference item. Strategies: exercise early in year, track AMT crossover point, disqualifying dispositions. Use the iso amt tax calculator result to inform your calculation.

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Frequently Asked Questions

Why do ISOs trigger AMT?

What is a disqualifying disposition?

How can I minimize ISO AMT?

What is the AMT credit for ISO exercises?

How are NSOs different from ISOs for tax purposes?