ISO AMT Exercise and Hold Calculator
Exercising ISOs and holding for long-term capital gains is the most tax-efficient stock option strategy — but triggers AMT in the year of exercise. This calculator estimates AMT exposure and the optimal exercise window to minimise total federal tax.
Why Exercise And Hold Matters
ISOs that vest and are exercised then held meet the 'qualifying disposition' rules — 1 year from exercise AND 2 years from grant. The entire gain (FMV at sale minus strike) is taxed at long-term capital gains rates, not ordinary. The savings: 17 percentage points federally (37% ordinary vs 20% LTCG).
AMT Mechanics In One Paragraph
Regular tax calculates one way. AMT calculates a parallel way that adds the ISO bargain element. You pay the higher. The 'extra' you paid in AMT becomes AMT Credit applied against future years' regular tax. So AMT is timing, not permanent tax — but it can be years before you recover it.
Optimal Exercise Window
The lowest-AMT window is when FMV is closest to strike (early in company growth). Exercising at a $1 spread costs almost no AMT. Exercising at $20 spread on 10K shares costs $52K+ in AMT. Many startup employees exercise immediately after vesting to lock in low AMT exposure.
Source: IRC §422 Incentive Stock Options; IRC §55-59 Alternative Minimum Tax. Last updated: May 2026.