What will you owe in AMT when you exercise your ISOs?

ISO exercise doesn’t create regular income tax, but the spread between your strike price and current FMV is an AMT preference item. For large exercises, this can mean a six-figure tax bill due in April. Model the two paths before you decide when to exercise.

2026 estimates · Federal AMT · Hold vs. sell-same-year comparison · Not tax advice

ISO/AMT exposure calculator

See your AMT exposure before you exercise.

Exercising ISOs doesn’t create regular income tax, but the spread between your strike price and the current FMV is an AMT preference item. Enter your numbers to see your tentative minimum tax and any AMT bill before you decide when to exercise.

Exercise strategy

Holding after exercise may trigger AMT. Selling in the same year avoids AMT but creates ordinary income.

Your ISO exercise

ISO shares to exercise

Number of incentive stock option shares

Strike price (per share)

Your exercise price, the price you pay per share

Current FMV (per share)

Current fair market value (must be greater than strike price)

Other income this year

W-2, business income, or other ordinary income

Filing status

State

California adds 13.3% on ordinary income; separate CA AMT also applies

Hold after exercise — qualifying disposition

Spread at exercise (AMT preference item)$180,000

Total AMTI (income + spread)$380,000

AMT exemption (reduced)$90,100

Taxable AMTI after exemption$289,900

Tentative minimum tax$76,282

Regular income tax (on other income only)$36,734

AMT bill at exercise

$39,548

AMT exceeds your regular income tax on this exercise. You'll owe this amount above your regular tax, due in the year you exercise.

AMT exceeds $10,000 — consider making an estimated payment

This AMT liability is due in the year you exercise. If withholding won’t cover it, an estimated quarterly payment may be required to avoid underpayment penalties. The quarter in which you exercise is the relevant deadline.

AMT credit carryforward

AMT paid in the year of exercise generally creates an AMT credit that can offset future regular tax in years when your regular tax exceeds your tentative minimum tax. This credit doesn’t expire, but it can only be used in years when you don’t owe AMT. Coordinate with your CPA on how to track and deploy this credit.

California note: California has its own AMT at approximately 7% on CA AMTI with a separate exemption. CA AMT operates independently from federal AMT. Your CPA should model both.

How the alternative minimum tax works →

ISO exercise timing and AMT credit planning can determine whether this event costs you tens of thousands or nothing.

Illustrative estimates only. Uses 2026 federal income tax brackets, standard deductions, and AMT parameters. California AMT modeled separately at approximately 7% on CA AMTI (not included in totals shown). Does not model NIIT, state AMT credits, itemized deductions, or tax credits. Does not constitute tax advice.