How do I avoid AMT when exercising ISOs?

Exercise only enough shares to stay below your AMT crossover point, coordinate exercises with high-income years, or exercise and sell in the same year (disqualifying disposition) which eliminates the AMT preference item.

ISO AMT Calculator 2026 — Incentive Stock Option AMT Estimator

ISO exercise details

Filing status

Number of ISO shares

Strike (exercise) price per share

FMV at exercise per share

ISO bargain element: $100,000(5,000 × ($25 − $5))

Annual W-2 salary

Excluding the ISO exercise income

Other AMT preference items

e.g. private activity bond interest, certain depreciation adjustments

State tax rate %

Used to estimate SALT deduction added back for AMTI

2026 OBBBA change: The AMT exemption phaseout rate doubled from 25¢ to 50¢ per dollar above the threshold. This significantly increases AMT exposure for high earners exercising ISOs.

AMT calculation

AMT owed (Form 6251)

$13,254

Total tax: $45,188 (regular $31,934 + AMT $13,254)

AMT crossover point

2,451shares

Max shares you can exercise without triggering AMT (bargain element: $49,020)

Regular tax vs. AMT calculation

W-2 salary	$180,000
Standard deduction (Single)	$16,100
Regular taxable income	$163,900
Regular tax (2026 brackets)	$31,934

ISO bargain element	$100,000
Other AMT preferences	$0
SALT deduction added back	$0
AMTI (Alternative Minimum Taxable Income)	$263,900
AMT exemption (Single)	$90,100
Phaseout reduction (50¢ per $1 above $500,000)	$0
AMT exemption after phaseout	$90,100
AMT taxable income	$173,800
Tentative minimum tax (26% up to $244,500 + 28% above)	$45,188

AMT owed (TMT − regular tax)	$13,254
Total tax (regular + AMT)	$45,188

AMT credit recovery: The $13,254 in AMT generates a credit on Form 8801 that carries forward indefinitely. In future years when your regular tax exceeds AMT, you can use this credit to reduce your regular tax bill.

• 2026 AMT exemption: $90,100 (Single) / $140,200 (MFJ)

• OBBBA phaseout: 50¢ per dollar above $500,000 (Single) / $1,000,000 (MFJ)

• AMT rates: 26% on first $244,500, 28% above

• Assumes standard deduction (itemizing may change results)

• SALT deduction estimated from state tax rate on salary

Disclaimer

This tool provides estimates for educational purposes only and is not tax advice. AMT calculations involve many factors not captured here. Consult a qualified tax professional before exercising ISOs or making tax decisions.

How this is calculated

The AMT calculation for ISO exercises follows IRS Form 6251 and IRC § 56:

ISO bargain element = (FMV at exercise − strike price) × shares exercised.
AMTI = regular taxable income + bargain element + other AMT preferences + SALT deduction added back.
AMT exemption = $90,100 (single) or $140,200 (MFJ), reduced by 50¢ per dollar of AMTI above $500,000/$1,000,000 (OBBBA 2025).
AMT taxable income = AMTI − exemption after phaseout.
Tentative minimum tax = 26% on first $244,500 + 28% on remainder.
AMT owed = max(0, tentative minimum tax − regular tax). AMT credit carries forward on Form 8801.

Sources

Reviewed against 2026 figures · Last updated June 2026

zhisan

Independent Developer

Full-stack developer passionate about building useful tools for the developer community. Creates free, privacy-focused web applications that solve everyday coding problems.

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What is How to Use the ISO AMT Calculator?

When you exercise Incentive Stock Options (ISOs) and hold the shares, the bargain element (FMV at exercise minus strike price, times shares) is added to your Alternative Minimum Taxable Income under IRC § 56(b)(3). This can trigger AMT — a parallel tax system that may result in a significant tax bill on unrealized paper gains. For 2026, the AMT exemption is $90,100 (single) or $140,200 (MFJ). The One Big Beautiful Bill Act (OBBBA) doubled the AMT exemption phaseout rate from 25¢ to 50¢ per dollar above the threshold ($500,000 single / $1,000,000 MFJ), significantly increasing AMT exposure for high earners exercising ISOs. AMT is calculated at 26% on the first $244,500 of AMT taxable income and 28% above that. If your tentative minimum tax exceeds your regular tax, you owe the difference as AMT. However, AMT paid generates a credit (Form 8801) that carries forward indefinitely and can be recovered in future years when regular tax exceeds AMT.

How to Use

Enter the number of ISO shares you plan to exercise
Input your strike price and the current FMV per share
Enter your annual W-2 salary (excluding the ISO exercise)
Select your filing status
Add any other AMT preference items if applicable
Review whether AMT applies and how much you would owe

Why Use This Tool?

Find your AMT crossover point — the maximum shares you can exercise without triggering AMT

Understand how the 2026 OBBBA phaseout changes (50¢ per dollar) affect your AMT exposure

Plan multi-year exercise strategies to minimize AMT

See the AMT credit you can recover in future years via Form 8801

Tips & Best Practices

The 2026 OBBBA accelerated AMT exemption phaseout to 50¢ per dollar (up from 25¢), increasing AMT exposure for high earners
AMT paid on ISO exercises generates a credit (Form 8801) that you can recover when your regular tax exceeds AMT in future years
Exercise and sell in the same year (disqualifying disposition) eliminates the AMT preference item but taxes the spread as ordinary income
Coordinate ISO exercises with high-income years when your regular tax already exceeds AMT
Consider exercising early in the year to give yourself time to sell before year-end if AMT is too high

Frequently Asked Questions

When does exercising ISOs trigger AMT?

AMT is triggered when you exercise ISOs and hold the shares. The bargain element (FMV at exercise minus strike price times shares) is added to your AMT income under IRC § 56(b)(3). If your tentative minimum tax exceeds your regular tax, you owe AMT on the difference.

What is the AMT crossover point?

The AMT crossover point is the maximum ISO bargain element you can exercise in a year without triggering AMT. It equals the available AMT headroom (exemption minus phaseout minus other preferences) divided by the effective AMT rate on the bargain element.

Can I recover AMT paid on ISO exercises?

Yes. AMT paid due to ISO exercises generates an AMT credit on Form 8801 that carries forward indefinitely. In future years when your regular tax exceeds AMT, you can use the credit to reduce your regular tax — typically recovering the full amount over 3–7 years.

What are the 2026 AMT exemption amounts?

For 2026, the AMT exemption is $90,100 for single filers and $140,200 for married filing jointly. Under OBBBA rules, the exemption phases out at 50¢ per dollar above $500,000 (single) or $1,000,000 (MFJ).

What does this calculator not cover?

This calculator estimates AMT on ISO exercises only. It does not cover: state AMT (some states like California have their own AMT), the impact of ISO exercises on NIIT or IRMAA, the holding period requirements for qualifying ISO dispositions (2 years from grant + 1 year from exercise), multi-year exercise optimization, or the tax impact of selling previously exercised ISO shares. This is an educational tool — consult a tax professional for complex equity compensation situations.

Real-world Examples

5,000 ISO shares at $5 strike, $25 FMV, $180,000 salary (single)

A tech employee exercises 5,000 ISOs with a $20/share bargain element, earning $180,000 in W-2 salary.

Input

ISO shares:              5,000
Strike price:            $5
FMV at exercise:         $25
Bargain element:         5,000 × ($25 − $5) = $100,000
W-2 salary:              $180,000
Filing status:           Single

Regular tax:
Taxable income: $180,000 − $16,100 = $163,900
Regular tax: ~$33,950

AMT calculation:
AMTI: $163,900 + $100,000 = $263,900
AMT exemption: $90,100 (below phaseout)
AMT taxable: $263,900 − $90,100 = $173,800
TMT: 26% × $173,800 = $45,188

Output

AMT owed: $45,188 − $33,950 = $11,238
Total tax: $33,950 + $11,238 = $45,188

AMT crossover point: ~3,300 shares
(3,300 × $20 = $66,000 bargain element
keeps TMT ≈ regular tax)

AMT credit: $11,238 carries forward on Form 8801
Recovery: ~3-5 years if regular tax exceeds AMT

Data sources: AMT exemption and rates: IRC § 55, § 56. ISO bargain element as AMT preference: IRC § 56(b)(3). AMT credit: IRC § 53, Form 8801. OBBBA phaseout change: One Big Beautiful Bill Act (2025). AMT exemption amounts: IRS Revenue Procedure (2026 inflation adjustments). This calculator is maintained by Zhisan. Last reviewed 2026. This tool is for informational and educational purposes only and does not constitute tax advice. Consult a qualified tax professional for advice specific to your situation.