ISO / AMT calculator
Incentive Stock Options can produce surprise five- or six-figure AMT bills if you exercise and hold. This calculator estimates AMT added beyond regular tax, plus compares against a same-day disqualifying disposition.
Worth it if you can hold 2 yrs from grant + 1 yr from exercise. Full appreciation past FMV becomes LTCG.
No AMT exposure. Tax is paid once. Full diversification immediately.
Educational estimate. Real AMT depends on your full return (deductions, other preferences, AMT credit carryforward). Consult a CPA before exercising.
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FAQ
- Why does exercising and holding ISOs trigger AMT?
- When you exercise an ISO and HOLD the shares, the bargain element (FMV − Strike) is a "preference item" for AMT — added to your AMT income even though it isn't taxed for regular purposes. The IRS effectively pre-collects tax on a paper gain.
- What's the difference between same-day-sell and exercise-and-hold?
- Same-day-sell (disqualifying disposition): bargain element is W-2 ordinary income; no AMT. Exercise-and-hold: bargain element is AMT preference; if held 2 years from grant + 1 year from exercise, full appreciation is LTCG (qualified disposition).
- Is there an AMT credit?
- Yes — AMT paid in the exercise year creates a credit recoverable in future years when regular tax exceeds AMT. The credit can take many years to fully recover.
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Educational guidance only. Not legal, tax, or individualized investment advice. We do not recommend individual securities or guarantee outcomes.