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AMT Credit Recovery Calculator

Paying alternative minimum tax on an ISO exercise creates a minimum tax credit that never expires. It also never arrives all at once. §53 releases it only in years where your regular tax exceeds your tentative minimum tax, which for most people is a few thousand dollars a year — until the shares are sold.

Tax year 2026 Figures final Last verified 2026-07-27 How we verify

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AMT Credit Recovery Calculator

Stock options · 2026 · US federal

Your numbers

$

From Form 8801. If you exercised incentive stock options and paid AMT, this is roughly what you paid — the ISO spread is a deferral item, so it generates credit in full.

$

This sets the annual gap between regular tax and tentative minimum tax, which is the rate at which the credit comes back.

%

Left at zero the projection is easy to check by hand, since every year is the same. A rising salary generally widens the gap and speeds recovery.

The most consequential question here. Selling is what reverses the AMT basis difference and releases a large slice of credit in one year.

$

Your regular tax basis.

$

Your AMT basis, under §56(b)(3). The difference between this and the strike is the adjustment that reverses on sale.

$

Counted from now. Set it beyond the projection to model never selling.

Advanced inputs
$

Further ISO exercises each year, or any other continuing Form 6251 adjustment. A large figure here keeps you in AMT permanently and stops recovery altogether.

%

A credit recovered in year nine is not worth its face value today. This prices that.

Runs entirely in your browser. Nothing you type is sent anywhere, stored, or logged.

Result

Years to recover it all Not within this projection years
Credit you can claim each year $7,930 The excess of regular tax over tentative minimum tax. §53(c) makes this a hard ceiling regardless of how much credit you hold.
Recovered over the projection $94,300
Still outstanding at the end $25,700
You are still in AMT No — the credit is flowing
Fully recovered by the end No
Claimed in the first year $7,930
Capacity in the year you sell $22,930
Extra capacity the sale creates $15,000
Claimed in the year you sell $22,930
Further AMT the projection adds $0
Present value of what you recover $72,427
AMT owed each year, if any $0
Regular tax in an ordinary year $41,704
Tentative minimum tax in an ordinary year $33,774

Estimates for the tax year shown, on the assumptions set out under what this does not model. Educational information, not tax advice.

Line by line
Credit carried forward at the start $120,000
Regular tax in an ordinary year $41,704
Tentative minimum tax in an ordinary year $33,774
Annual capacity — the excess of the first over the second $7,930
Regular gain on sale (basis = strike) $280,000
AMT gain on sale (basis = value at exercise) $180,000
The bargain element reversing −$100,000
Capacity in the sale year $22,930
Extra capacity attributable to the sale $15,000
Total recovered over the projection $94,300
Further AMT generated $0
Outstanding at the end $25,700
Present value of the recovery $72,427

If you exercised incentive stock options and paid alternative minimum tax on the spread, you did not lose that money. You lent it to the government. The payment created a minimum tax credit under §53 which never expires and which you can carry forward for as long as it takes to use.

How long it takes is the question nobody answers well. The usual telling — "you get it back in future years" — skips the mechanism entirely. §53(c) caps the credit you may claim each year at the excess of your regular tax over your tentative minimum tax, and nothing else. Hold a $120,000 credit on a $220,000 salary and the ceiling is $7,930 a year. The credit is real, it is yours, and at that rate it takes fifteen years.

There is one thing that changes the arithmetic sharply, and it is the thing most people put off. Your ISO shares carry two different cost bases: the strike price for regular tax, and the value at exercise for AMT. Selling them produces a smaller gain for AMT than for regular tax, tentative minimum tax falls relative to regular tax by the whole of the old bargain element, and a large slice of credit is released in that single year. Selling the shares is what unlocks the credit. Holding them forever is what strands it.

Background reading: The tax forms your equity generates.

How this is calculated

Two numbers per year, and the difference between them. Everything else is bookkeeping over a projection.

  1. This year’s ceiling regular tax − tentative minimum tax §53(c). Where the difference is zero or negative you may claim nothing at all, however large your carryforward. This is the whole of the constraint and it is far tighter than people expect.
  2. What you claim the lesser of the ceiling and the credit you hold A carryforward is a balance, not an entitlement to the gap. §53(b) carries forward only what remains unused.
  3. When the two swap over tentative minimum tax > regular tax → this year owes AMT instead And that AMT joins the carryforward. Someone exercising options every year can watch the balance grow while recovering nothing, which is the opposite of what the word "credit" suggests.
  4. The two bases regular basis = strike · AMT basis = value at exercise §56(b)(3). The gap between them is exactly the spread you were taxed on, and it sits dormant until you dispose of the shares.
  5. What the sale does AMT gain is smaller than regular gain by the bargain element Regular tax rises on the full gain while tentative minimum tax rises on a smaller one, so the ceiling widens by roughly the capital gains rate applied to the old spread. That released capacity is the point of the exercise.
  6. What it is worth today Σ claimed in year n ÷ (1 + discount rate)ⁿ A credit released in year nine is not a dollar today. Nothing else on this page discounts, so this is the only figure that prices the delay honestly.

A worked example

Dana exercised 10,000 incentive stock options at a $2.00 strike when the 409A valuation was $12.00, and paid alternative minimum tax on the $100,000 spread. She is carrying $120,000 of minimum tax credit, earns $220,000, and still holds the shares.

In an ordinary year her regular tax is $41,704 and her tentative minimum tax is $33,774. The difference — $7,930 — is everything §53 will give her. Nothing about holding $120,000 of credit changes that ceiling; five years of patience recovers $39,650 and no more.

In year six she sells at $30.00. For regular tax the gain is measured from the $2.00 strike: $280,000. For AMT it is measured from the $12.00 she was already taxed on: $180,000. Regular tax rises by $42,000 on the larger gain while tentative minimum tax rises by only $27,000 on the smaller one, so the ceiling for that year is $22,930 rather than $7,930 — the extra $15,000 being 15% of the $100,000 spread finally reversing.

Even so, ten years leaves her $25,700 short. The credit does not expire and she will get there eventually, but the projection makes the real point: a carryforward of this size is not a $120,000 asset. It is a slow annuity whose value depends almost entirely on when the shares are sold.

Figures from verified case selling-the-shares-releases-a-years-worth
Annual Capacity$7,930.00
Sale Year Capacity$22,930.00
Extra Capacity From Sale$15,000.00
Recovered In Sale Year$22,930.00
Regular Gain At Sale$280,000.00
Amt Gain At Sale$180,000.00
Amt Basis Adjustment−$100,000.00
Total Recovered$94,300.00
Credit Remaining$25,700.00
Years To Full Recoverynull
Fully Recoveredfalse

Every figure here comes from the module the calculator runs, asserted on each build against a case whose year-by-year arithmetic was worked by hand from the bracket tables.

What this does not model

Every calculator has a boundary. Here is where this one stops — read it before relying on the number.

Questions

Why can I only claim a few thousand dollars a year?

Because §53(c) sets the annual limit at the excess of your regular tax over your tentative minimum tax, and for a salaried taxpayer those two numbers are closer than you would guess. Regular tax is progressive up to 37%, but it applies to income after the standard deduction; tentative minimum tax is 26% or 28% applied to a broader base with that deduction added back.

The result is a gap of a few thousand dollars over a wide range of incomes. It is not proportional to your salary, your credit, or the AMT you originally paid — which is why two people with identical carryforwards can recover them at completely different speeds.

Does the credit expire if I never use it?

No. The minimum tax credit carries forward indefinitely under §53(b), with no time limit and no use-it-or-lose-it rule. What it does not do is accrue interest, so a credit recovered in year fifteen has been eroded by inflation and by whatever you could have earned on the money.

That is why the present-value figure is on this page. Treating a $120,000 carryforward as a $120,000 asset overstates it substantially, and the longer the recovery the worse the overstatement.

Why does selling the shares release so much of it?

Because the two tax systems have been carrying different cost bases for the shares since the day you exercised. §56(b)(3) gives ISO stock an AMT basis equal to the value you were taxed on at exercise, while for regular tax the basis stays at the strike.

On sale the regular gain is therefore larger than the AMT gain by exactly the old spread. Regular tax goes up more than tentative minimum tax does, the gap between them widens, and the ceiling for that year rises with it. The deferral item you paid AMT on years ago is finally reversing, and that reversal is what pays you back.

My carryforward is going up, not down. Is the calculator wrong?

Probably not. If you exercise incentive stock options every year, or carry any other continuing Form 6251 adjustment, your tentative minimum tax can exceed your regular tax every year. In that case §53(c) allows nothing, and the fresh AMT you owe is added to the carryforward under §53(b).

The balance grows and nothing comes back, which is the exact opposite of what most people assume a credit does. Set the recurring adjustment field to a realistic figure and the projection will show it. The way out is a year with no exercise, or a sale.

Should I sell shares purely to release the credit?

It is a genuine argument, but not usually a decisive one on its own. Selling to release credit means paying capital gains tax now to recover a credit you would eventually recover anyway. The gain is real money and the credit is a timing benefit, so the trade is only clearly worthwhile when the credit is large, the recovery would otherwise take a decade, and you wanted to diversify regardless.

What is worth doing in almost every case is selling in tranches rather than all at once. Capacity unused in a year is not carried anywhere, so a single enormous sale can create far more room than you have credit to fill, wasting the rest.

What if the company failed and the shares are worthless?

The credit survives. You paid AMT on a spread that evaporated, which is the cruellest version of this whole area, but the carryforward is unaffected by what happened to the stock afterwards. Selling or otherwise disposing of the worthless shares produces a large capital loss for regular tax and an even larger one for AMT.

The relief is slow, because §1211(b) allows only $3,000 of net capital loss against ordinary income a year. Set a sale price of zero above to see the shape of it — the loss widens the gap a little, and the credit still comes back over years rather than at once.

Is the credit the same as the AMT I paid?

For an ISO exercise, in practice yes. §53(d) grants the credit only for AMT caused by deferral items rather than exclusion items, and the incentive stock option adjustment is a deferral item — it reverses on sale through the basis difference, which is precisely what makes it creditable.

If your AMT in that year was partly caused by exclusion items, such as a disallowed state and local tax deduction, that portion generated no credit at all. Take the figure from Form 8801 rather than from what you remember paying.

Does a bigger salary help me recover faster?

Usually, but not reliably, and the exceptions are counter-intuitive. Rising income widens the gap over most of the range because regular tax reaches 32% and 35% while the AMT rate stops at 28%. Past roughly $500,000 the AMT exemption starts phasing out at 50 cents on the dollar, which pushes tentative minimum tax up quickly and can narrow the gap again.

A joint filer on $400,000 has a smaller annual capacity than a single filer on $220,000, because the 28% AMT threshold is not doubled for joint filers while the regular brackets are. There is a golden case pinning exactly that comparison.

Is anything I enter here sent anywhere?

No. The projection runs entirely in your browser as a static JavaScript module, with no network request of any kind. Your salary, your carryforward and your share position never leave your device, nothing is stored between visits, and there is no account or email gate on the result.

Sources

Every rate and threshold used above traces to one of these. We cite the statute, the regulation, or the IRS directly — never another commentary site.

This page is educational information, not tax, legal or investment advice, and using it creates no professional relationship. Equity compensation interacts with the rest of your return in ways a single calculator cannot see. Before acting on a figure of any size, take it to a qualified tax adviser.