Cliff & Vest Equity compensation, worked out

ISO AMT Calculator

Exercising an incentive stock option produces no regular taxable income and can still produce a very large tax bill. This works out the alternative minimum tax, the total cash you need, and the largest exercise you can make without triggering AMT at all.

Tax year 2026 Figures final Last verified 2026-07-26 How we verify

01

ISO AMT Calculator

Stock options · 2026 · US federal

Your numbers

Brackets, the standard deduction and the AMT figures all differ by year. Pick the year the event falls in, not the year you are filing.

$

The exercise price fixed in your grant, not the current valuation.

$

The current 409A valuation. This is usually well below the preferred price your company last raised at.

$

W-2 wages plus interest, NSO spread and RSU vesting — everything already taxed as ordinary income.

Advanced inputs
$

Anything else on Form 6251 lines 2b–2t. Leave at zero unless you know you have one.

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

Result

AMT caused by this exercise $19,370 Measured against what you would owe without exercising, so a reader already in AMT for other reasons is not charged for it twice.
Total cash needed $34,370 Exercise cost plus the AMT. This is the number that decides whether the exercise is possible.
Largest AMT-free exercise 2,904 shares The most shares you could exercise this year without owing any additional AMT.
Bargain element (the AMT preference) $105,000
Cost to exercise $15,000
All-in cost per share $3.44
AMT credit carried forward $19,370
Effective AMT rate on the spread 18.4%

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
Taxable income (regular tax) $203,900
Regular tax $41,704
ISO adjustment (Form 6251 line 2i) $105,000
Alternative minimum taxable income $325,000
AMT exemption after phaseout $90,100
AMT base $234,900
Tentative minimum tax $61,074
Total AMT = tentative minimum tax − regular tax $19,370
Less AMT you would owe without exercising $0
AMT caused by this exercise $19,370

Exercising an incentive stock option is the rare transaction that generates no regular taxable income and a very large tax bill anyway. The spread between your strike price and the current 409A fair market value is a preference item under IRC §56(b)(3), which means it is invisible to your regular tax calculation and fully visible to the alternative minimum tax.

The consequence catches people out every year. You write a cheque to your employer for shares you cannot sell, and the following April you owe tax on a paper gain you have not realised and might never realise. If the company later fails, the shares go to zero and the tax does not come back — you recover it only as a credit against future regular tax, which requires future income the failed company is no longer paying you.

The calculator above answers the two questions that actually decide whether an exercise is possible: how much total cash you need on the day, and how many shares you could exercise without crossing into AMT at all. The second number is usually the more useful of the two, because exercising up to that line each year is the standard way to convert options into long-term capital gains treatment without ever writing an AMT cheque.

Background reading: When to exercise your stock options.

How this is calculated

Five steps, in the order Form 6251 takes them. Every figure below comes from the tax-year rules file, and every one of those figures carries a citation.

  1. Bargain element shares × (409A fair market value − strike price) Never negative. An option struck above the current valuation produces no preference item at all, however many shares you exercise.
  2. Alternative minimum taxable income regular taxable income + deduction add-back + bargain element Form 6251 begins at Form 1040 line 15, which is already net of your deduction, so the deduction has to be added back. If you took the standard deduction the whole amount returns; if you itemised, only the state and local tax portion does.
  3. Exemption after phaseout max(0, exemption − phaseout rate × max(0, AMTI − phaseout start)) For 2026 the phaseout rate is 50 cents on the dollar, up from 25 cents for 2018 through 2025. This is the change most existing ISO calculators have not made.
  4. Tentative minimum tax 26% × min(base, threshold) + 28% × max(0, base − threshold) The base is AMTI less the exemption. Only two rates exist in the AMT system.
  5. AMT owed max(0, tentative minimum tax − regular tax) AMT is the excess, not a second tax stacked on top. If your regular tax is already the larger of the two, the exercise costs you nothing extra — which is why a high salary can make an exercise cheaper, not dearer.

A worked example

Dana and Sam file jointly on $400,000 of combined W-2 income and take the standard deduction. Dana exercises 40,000 incentive stock options at a $1.50 strike when the most recent 409A values the shares at $12.00.

Writing the cheque to the company costs $60,000. The tax consequence is invisible on the regular side of the return and severe on the AMT side: the $420,000 spread lands on Form 6251 line 2i and pushes alternative minimum taxable income to $820,000, comfortably below the $1,000,000 phaseout threshold, so the full exemption survives intact.

The result is that the exercise costs roughly three times what the shares themselves cost, and the shares remain illiquid. Had Dana instead exercised the largest AMT-free block, the entire bill would have been the exercise price alone.

Figures from verified case mfj-standard-2026
Bargain Element$420,000.00
Exercise Cost$60,000.00
Regular Taxable Income$367,800.00
Regular Tax$73,468.00
Amti$820,000.00
Exemption$140,200.00
Amt Base$679,800.00
Tmt$185,454.00
Amt Owed$111,986.00
Amt Credit$111,986.00
Cash Needed$171,986.00
Cost Per Share$4.30
Amt Free Shares1,909

Every figure above is produced by the same code that runs the calculator, checked on every build against a test case that was hand-computed on Form 6251. If they ever disagree, this page does not publish.

What this does not model

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

Questions

How many ISOs can I exercise without triggering AMT?

The calculator solves this directly — see Largest AMT-free exercise. The figure is found by searching for the exact share count at which tentative minimum tax first exceeds your regular tax, so it is the true boundary rather than an approximation.

Two things move it more than anything else. A higher salary raises your regular tax, which raises the bar the tentative minimum tax has to clear, so the AMT-free block gets larger as your income rises — until your AMTI crosses the exemption phaseout, at which point it collapses. And a wider spread shrinks it proportionally, which is why exercising early, when the strike and the 409A are close, is so much cheaper than exercising late.

Does exercising in January instead of December help?

Not for the AMT itself — the preference item lands in whichever calendar year you exercise, and the amount is the same either way. What January buys you is time: the tax is not due until April of the following year, so an exercise on 2 January gives you roughly fifteen months before the bill lands, against three months for an exercise on 20 December.

January also starts the twelve-month clock for long-term capital gains and the two-year clock from grant that a qualifying disposition requires, while leaving the whole year to decide whether to sell before year end and undo the preference item entirely.

What is the AMT credit, and will I get the money back?

The AMT generated by an ISO exercise is a deferral item, not an exclusion item, so it becomes a minimum tax credit that carries forward indefinitely. In each later year you can use it to reduce your regular tax, but only down to that year’s tentative minimum tax — never below.

In practice this means recovery is slow and conditional. It requires years in which your regular tax comfortably exceeds your tentative minimum tax, and it is exactly the situation that does not arise if the company fails and your income drops. Treat the credit as a genuine asset, but not as a refund.

What changed for tax year 2026?

The phaseout of the AMT exemption got considerably harsher. For 2018 through 2025 the exemption shrank by 25 cents for every dollar of AMTI above the threshold, and the thresholds themselves had been indexed up past $1.2 million for joint filers. For 2026 the thresholds reset to $500,000 and $1,000,000 and the phaseout rate doubled to 50 cents on the dollar.

For anyone exercising a large block the effect is significant: the exemption now disappears entirely at $680,200 of AMTI for a single filer, where previously it persisted far higher. If you are comparing against a calculator that still shows the old phaseout, it is understating your bill.

Do I owe AMT if my company is private and I cannot sell the shares?

Yes. Liquidity has no bearing on it. The preference item arises on exercise, and the Internal Revenue Service does not distinguish between shares you could sell tomorrow and shares in a company with no market at all.

This asymmetry is the central risk in exercising private-company ISOs, and it is the reason the AMT-free figure matters so much. Some companies run tender offers that create a window to sell, and some employees finance exercises against the shares themselves — but neither should be assumed to exist when you are deciding whether you can afford the tax.

What happens if I early-exercise and file an 83(b) election?

Early-exercising unvested ISOs at or near the grant price and filing an 83(b) election within 30 days generally reduces the AMT consequence to almost nothing, because the spread at that moment is almost nothing. The election fixes the measurement date at exercise rather than at vesting.

The trade is that you pay the full exercise price up front for shares that may never vest, in a company that may not succeed. That money is at risk immediately and the strike is not refundable. The AMT saving is real; so is the loss if it goes wrong.

Why does the calculator ask for my other income at all?

Because AMT is a comparison, not a standalone tax. Your other income sets your regular tax, and the AMT you owe is only the amount by which the tentative minimum tax exceeds it. Two people exercising an identical block on identical terms can owe wildly different amounts purely because of what they earn elsewhere.

It also determines whether the exemption phaseout bites. Ordinary income counts towards AMTI, so a high salary can push you into the phaseout zone before the option spread is even added.

Is any of this sent to a server?

No. The calculation runs entirely in your browser, in a JavaScript module served as a static file. Nothing you type is transmitted, logged, or stored anywhere, and there is no account, no email gate, and no way for us to see your figures. You can disconnect from the network after the page loads and it will keep working.

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.