ISO AMT Exercise Tax Shock 2027 Calculator

Calculate the AMT tax shock from exercising Incentive Stock Options (ISOs) in 2027 — the bargain element creates AMT preference at 26-28% even if you don't sell the shares.

The AMT Trap

ISO exercise has NO regular tax at exercise (vs NSOs which are taxed). But the 'bargain element' (FMV − exercise price) creates an AMT preference item. If your AMT exceeds regular tax for the year, you owe AMT on the bargain element — without having sold shares to pay it.

AMT Calculation Simplified

AMTI = regular taxable income + ISO bargain element − AMT exemption. 2027 AMT exemption: ~$87,000 single, $135,000 joint (phaseout above ~$610k single). AMT rate: 26% on first $232,600 AMTI, 28% above. AMT = lesser of (AMT − regular tax) or excess.

AMT Credit Carryforward

Pay AMT now, recover later. When you later sell the stock (or in years AMT < regular tax), the AMT credit reduces your tax. Carryforward indefinitely. The credit reverses the timing mismatch, but only if you have enough regular tax in future years to absorb it.

Strategy: Exercise Early, Stay Below ISO 100k Limit

Exercise small batches each year keeping bargain element under AMT exemption. Or exercise large in low-income year (between jobs, on sabbatical). Time vested-but-unexercised options if grant has 10-yr expiration runway.

Source: irs.gov Form 6251 AMT, Section 422 ISO rules. Last updated: May 2026.