ISO AMT Calculator
Estimate your Alternative Minimum Tax (AMT) liability when exercising Incentive Stock Options. The bargain element (FMV minus strike price) becomes AMT income and is taxed at 26% or 28% above the 2026 exemption amount.
How ISOs Trigger AMT
Incentive Stock Options (ISOs) do not create regular federal income tax at exercise — that is their key benefit. However, for Alternative Minimum Tax purposes, the bargain element (fair market value minus strike price, times shares exercised) is treated as income in the year of exercise. When AMT income exceeds the exemption, you owe AMT at 26% on the first portion and 28% above a threshold.
2026 AMT Exemptions and Rates
For 2026, the AMT exemption is approximately $88,100 for single filers and $137,000 for married filing jointly. The exemption phases out starting at $626,350 (single) and $1,252,700 (MFJ) at a rate of 25 cents per dollar of AMTI above those thresholds. AMT rates: 26% on AMTI up to $239,100, 28% above that. You owe AMT only to the extent it exceeds your regular federal income tax.
Bargain Element Math
Bargain element = (Current Fair Market Value − Strike Price) × Shares Exercised. Example: strike $5, current FMV $45, 10,000 shares exercised = $400,000 bargain element. If your regular taxable income is $200,000, your AMTI might be around $600,000, triggering significant AMT. The AMT you pay creates an "AMT credit" that can offset regular tax in future years when the stock is sold.
Strategies to Minimize ISO AMT
Exercise-and-hold early in the year so you have time to decide whether to sell before year-end (a same-year sale converts to a disqualifying disposition — ordinary income, no AMT). Exercise in small batches annually to stay below the AMT trigger. Model your AMT BEFORE exercising — many founders and early employees get surprised by five- or six-figure tax bills on paper gains that later evaporated.