Exercising ISOs and holding the shares can trigger AMT on a gain you have not sold. Estimate the bill before you exercise.
Enter your income, a number of shares, and prices greater than zero.
Estimated AMT from exercising and holding
—
| Bargain element (spread) on your ISOs | — |
|---|---|
| Cash needed to exercise | — |
| Regular federal tax (ISO spread not included) | — |
| AMT income, before exemption | — |
| AMT exemption (after phase-out) | — |
| AMT taxable income | — |
| Tentative minimum tax | — |
| AMT owed (the higher tax, minus regular tax) | — |
| AMT credit carried forward (Form 8801), about | — |
| Cash needed this year (exercise cost + AMT) | — |
Regular tax vs. tentative minimum tax
You pay whichever is higher. When the minimum tax is larger, the difference is your AMT.
What if you exercise fewer shares?
| Shares exercised | Spread | AMT owed |
|---|
This calculator is an illustration for general educational purposes and is not tax, legal, or investment advice. It uses 2026 federal brackets, the standard deduction, and 2026 AMT figures. It assumes you hold the shares through year-end (no sale in the same calendar year), treats your other income as ordinary wages, and ignores state tax and AMT, other AMT adjustments, and future use of the AMT credit. If you itemize deductions, such as large state taxes, AMT can apply sooner than shown. Any AMT must be covered by withholding or estimated payments to avoid an underpayment penalty; you generally owe no penalty if payments cover at least 90% of this year's tax, or 100% of last year's (110% if last year's AGI was over $150,000).
Alternative Minimum Tax is a second, parallel tax calculation. You work out your tax under the regular rules, then again under the AMT rules, and you pay whichever number is higher.
When you exercise ISOs and hold the shares, the bargain element (what the shares are worth minus what you paid) is excluded from your regular taxable income. AMT adds it right back. You can owe real tax on a gain you have not sold, and at a private company, may not be able to sell.
In 2026, the AMT exemption starts phasing out at $500,000 of AMT income for single filers ($1,000,000 for married filing jointly), and it phases out twice as fast as it used to, so large exercises are more likely to trigger AMT.
The AMT you pay because of an ISO exercise usually is not lost for good. It creates a minimum tax credit you can use in future years, but it can take years to recover and does not help you pay the bill in April.
Modeling your AMT before you exercise can save you from a five-figure surprise. Book a free 15-minute call.
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