ISO AMT Calculator — Incentive Stock Option AMT Tax

When you exercise an ISO and hold the shares (rather than selling same-day), the spread between the strike price and the fair market value at exercise — the "bargain element" — is added to your Alternative Minimum Taxable Income for the year, even though no cash changed hands. If your AMTI exceeds the AMT exemption ($88,100 single / $137,000 married filing jointly for 2025), you may owe AMT on top of regular tax. NSOs and RSUs do not have this preference adjustment because their bargain element is already taxed as ordinary income at exercise.

Bargain element = (Fair Market Value at exercise − Strike price) × Number of shares exercised. Example: 5,000 ISOs at a $5 strike with the FMV at exercise of $40 produces a bargain element of (40 − 5) × 5,000 = $175,000. Plug that figure into the ISO bargain element field of the calculator above to see the AMT impact.

A qualifying disposition requires holding the shares at least two years after grant AND one year after exercise. If you sell same-year as exercise (a same-year disqualifying disposition), the bargain element becomes regular ordinary income and AMT does not apply, because the AMT preference is replaced by the regular-tax inclusion. If you exercise and hold across calendar years, AMT can apply at exercise and you may later get an AMT credit when you sell.

AMT paid because of timing differences (like the ISO bargain element) generates an AMT credit (Form 8801) that carries forward indefinitely. In any later year where your regular tax exceeds your tentative minimum tax, you can use the credit to reduce your regular tax — usually in the year you sell the ISO shares as a qualifying disposition. The credit is not refundable post-TCJA; it can only offset regular tax above the AMT line.

Yes — many ISO holders pre-compute the AMT "headroom" each year and exercise only enough shares to keep AMTI just below the exemption phaseout. The phaseout begins at $500,000 for single filers and $1,000,000 for married filing jointly in 2026 (the OBBBA lowered these thresholds from the higher TCJA-era levels). Spreading the exercise across multiple years keeps each year's bargain element under the line and avoids paying AMT you'd later need to recover via credit.

Generally no. RSUs are taxed as ordinary income at vest and that income is included in regular AGI, so no AMT preference adjustment is needed. NSOs are taxed as ordinary income at exercise (bargain element already on the W-2) — again, no separate AMT preference. Only ISOs have the AMT-only timing inclusion at exercise.

The One, Big, Beautiful Bill Act (OBBBA, P.L. 119-1 §70105) amended IRC §55(d)(4) to lower the AMT exemption phaseout thresholds starting 2026 — back from the TCJA-era $626,350 / $1,252,700 to $500,000 / $1,000,000. Inflation indexing of the exemption itself continues, so the 2026 exemption is $90,100 single / $140,200 MFJ, but the exemption now starts phasing out earlier. ISO holders who relied on the higher TCJA phaseout for multi-year exercise plans should re-run the math for 2026 exercises. The 26%/28% bracket threshold also adjusts — $244,500 for 2026 (vs $239,100 for 2025).

Same-year disqualifying dispositions (exercise and sell in the same calendar year) substitute regular ordinary-income tax for the AMT preference — for those, use the Stock Options Calculator, which models the lesser-of rule and the holding-period test directly. Use this AMT calculator when you intend to exercise-and-hold across year-end and want to see whether AMT would be triggered for the exercise year.