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ISO AMT Calculator — Incentive Stock Option AMT Tax

See whether exercising your incentive stock options will trigger Alternative Minimum Tax for 2025 or 2026. Computes the ISO bargain element added to AMTI, applies the 26% / 28% AMT rates above the exemption, and surfaces the AMT credit you can recover when you sell.

How to use this calculator for an ISO exercise

  1. 1. Compute your bargain element. (FMV at exercise − Strike price) × Number of shares exercised. A 5,000-share exercise at $5 strike when the FMV is $40 = ($40 − $5) × 5,000 = $175,000 bargain.
  2. 2. Enter your other ordinary income (W-2 wages, RSU vest income, NSO bargain, etc.) into "Gross Income" below — exclude the ISO bargain itself.
  3. 3. Enter the ISO bargain element in the "ISO Bargain Element" field under AMT Preference Items & Adjustments.
  4. 4. Read the result. If "AMT Owed" is non-zero, you'll owe that amount on top of your regular tax for the exercise year — it generates an AMT credit you can recover when you sell.
  5. 5. To plan a multi-year exercise: increase the ISO bargain field until "AMT Owed" turns positive — that's roughly your one-year ISO headroom for the chosen filing status and income.
Income & Filing Details
No AMT owed. Your regular tax of $36,734 exceeds the tentative minimum tax of $28,574.
Check your standard vs itemized deduction?Deduction comparison
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AMT Preference Items & Adjustments

Only applies with itemized deductions — Form 6251 adds back either your itemized SALT or your full standard deduction, never both. Ignored while Standard Deduction is selected above.

Only applies with itemized deductions. Ignored while Standard Deduction is selected above.

Regular Tax

$36,734

Tentative Minimum Tax

$28,574

AMT Owed

$0

Total Tax

$36,734
↓ You save $333 vs 2025
You are not subject to AMT
Regular taxable income$183,900
+ AMT Preference Items$16,100
AMT Income (AMTI)$200,000
- AMT Exemption$90,100
AMT Base$109,900
Tentative minimum tax$28,574
- Regular Tax$36,734
AMT Owed$0
Total Tax (Regular + AMT)$36,734
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Frequently asked questions

How do incentive stock options trigger AMT?
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.
What is the ISO bargain element formula?
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.
How does a qualifying disposition avoid AMT?
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.
What is the AMT credit and when do I get it back?
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.
Can I exercise some ISOs without owing AMT?
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.
Do RSUs or NSOs trigger AMT?
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.
How did the 2026 OBBBA change AMT for ISO holders?
The One, Big, Beautiful Bill Act (OBBBA, P.L. 119-21 §70107) 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 — and separately doubled the phaseout RATE from 25% to 50% per dollar of AMTI over the threshold. 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 AND vanishes twice as fast once you're past the threshold. ISO holders who relied on the higher TCJA phaseout for multi-year exercise plans should re-run the math for 2026 exercises — headroom shrinks more than the threshold change alone implies. The 26%/28% bracket threshold also adjusts — $244,500 for 2026 (vs $239,100 for 2025).
Does this handle ISO disqualifying dispositions?
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.

Sources

Key Tax Terms

Alternative Minimum Tax (AMT)

A parallel tax system that ensures high-income taxpayers pay at least a minimum amount of tax. For 2025, the AMT exemption is $88,100 (single) and $137,000 (married filing jointly).

Vesting

The process by which you gain ownership of employer contributions to your retirement plan over time. Your own contributions are always 100% vested immediately.

Long-Term Capital Gains

Profits from selling assets held for more than one year, taxed at preferential rates of 0%, 15%, or 20% depending on your taxable income.

Marginal Tax Rate

The tax rate applied to your last (highest) dollar of taxable income. It indicates how much tax you would pay on an additional dollar of earnings.

SALT Deduction

An itemized deduction for state and local taxes paid, including income tax (or sales tax) and property tax. Under OBBBA, capped at $40,000 in 2025 and $40,400 in 2026, indexed 1% a year per return ($20,000 MFS in 2025) with phaseout above $500,000 MAGI ($505,000 in 2026) to a $10,000 floor. Pre-OBBBA (2018–2024) the cap was $10,000 flat.

Net Investment Income Tax (NIIT)

A 3.8% surtax on investment income (interest, dividends, capital gains, rental income) for individuals with modified AGI above $200,000 (single) or $250,000 (married filing jointly).

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