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Will Exercising ISOs Trigger AMT?

Estimate the alternative minimum tax on an incentive stock option exercise, and the approximate spread before AMT applies, using 2026 federal figures.

ISO Exercise AMT Calculator

Your inputs

After deductions, e.g. Form 1040 line 15

Estimated AMT: $42,074.

Estimated 2026 AMT on a $180,000 spread

Regular federal tax

$57,196

Unchanged by the exercise

Tentative minimum tax

$99,270

AMTI $512,200; exemption $140,200

Estimated AMT

$42,074

Owed on top of regular tax

Approximate spread before AMT applies: about $27,985 (roughly 1,554 shares at the current $18-per-share spread). Spread above this amount is estimated to add AMT at 26% or 28% at the margin, and at up to 42% within the exemption phase-out range.

AMT credit carryforward

AMT caused by ISO exercises generally creates a minimum tax credit that can offset regular tax in later years, subject to limits. Recovery can take years and is not assured.

Disqualifying dispositions

Selling within one year of exercise or two years of grant turns the spread into ordinary income instead. A same-year sale generally removes the AMT adjustment.

Share-price risk

AMT is based on the value at exercise. If the shares later fall, the tax already owed does not fall with them, and private shares may not be sellable to pay it.

Hypothetical, illustrative estimate using 2026 federal figures. It treats all income as ordinary and ignores other AMT adjustments, credits, existing credit carryforwards, capital-gain rates, and California or other state AMT (calculated separately). This is not tax, legal, or investment advice; consult your CPA before exercising. It should not be used, on its own, to decide whether to exercise, buy, sell, or hold any security. Calculations run in your browser; nothing you enter is sent or stored.

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2026 federal figures: sources

Common questions

Why can exercising ISOs trigger the alternative minimum tax?
When you exercise incentive stock options and hold the shares past year-end, the spread between fair market value and the strike price is not regular taxable income, but it is an adjustment for AMT. If the added spread lifts your tentative minimum tax above your regular tax, the difference is owed as AMT.
What changed for the AMT in 2026?
Under the One, Big, Beautiful Bill Act and IRS Rev. Proc. 2025-32, the 2026 AMT exemption is $140,200 (married filing jointly) and $90,100 (single). The exemption phase-out now begins at $1,000,000 and $500,000 of AMTI and reduces the exemption by 50 cents per dollar above those levels (previously 25 cents). The 28% AMT rate applies above $244,500 of AMTI after the exemption.
Is AMT paid on an ISO exercise gone for good?
Not necessarily. AMT caused by ISO exercises generally creates a minimum tax credit that can be carried forward to reduce regular tax in later years, subject to limits, so recovery can take several years. California has its own AMT, calculated separately. A CPA can model both before an exercise.

This calculator is provided for educational purposes only and its results are hypothetical and illustrative. It is a simplified estimate that ignores other AMT adjustments, credits, existing credit carryforwards, and California or other state AMT, and it does not constitute tax, legal, or personalized investment advice. Consult your CPA before exercising. It should not be used, on its own, to decide whether to buy, sell, or hold any security. Calculations run in your browser; nothing you enter is sent or stored.

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Related guides

Alternative Minimum Tax (AMT) Planning

AMT is a parallel federal tax you pay when it exceeds regular tax. ISO exercises are the most common trigger; 2026 law changes widen its reach.

Timing ISO Exercises Around the Alternative Minimum Tax

Exercising ISOs creates no regular income tax, but the spread counts for AMT; knowing where AMT starts helps size and time each exercise.

ISOs vs NSOs: How Stock Option Taxes Differ

NSO spreads are taxed as wages at exercise; ISO spreads skip regular tax but can trigger AMT, and qualify for long-term rates if holding periods are met.

Early Exercise and the 83(b) Election, Explained

Early exercise lets you buy unvested option shares now. An 83(b) election, due within 30 days, taxes them at today's value instead of at each vest.

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