ISO AMT Calculator (2026)
See the alternative minimum tax that exercising incentive stock options can trigger, from the bargain element you never received in cash.
Want to understand the concept, not just the number? Read The ISO and AMT Guide and more below.
How it's calculated
Exercising incentive stock options, or ISOs, can trigger the alternative minimum tax even though you receive no cash. The gap between the market value and your strike price, called the bargain element, is invisible to regular tax at exercise but counts as income for the AMT. If the AMT comes out higher than your regular tax, you pay the difference.
Take the default. You have $200,000 of regular taxable income and exercise ISOs with a $100,000 bargain element, filing single in 2026. Your regular tax is about $40,598. For the AMT, the $100,000 is added to income, giving $300,000. After the $90,100 exemption and the 26 percent rate, the tentative minimum tax is $54,574. Since that is higher, you owe the $13,976 difference as AMT on top of your regular tax.
The AMT you pay creates a credit you can recover in later years when your regular tax exceeds your AMT, so it is often a timing cost rather than a permanent one. Still, a large exercise can create a surprise bill with no cash to pay it. Many people exercise only enough each year to stay under the AMT, or sell some shares to cover the tax. Above $500,000 of AMT income for a single filer, the exemption itself starts to phase out, which raises the bill further.
Assumptions
- Adds the ISO bargain element to your taxable income as AMT income, applies the 2026 exemption and phase-out, then the 26 and 28 percent rates. State tax and other AMT adjustments are not included. — IRS Rev. Proc. 2025-32
- Shows the AMT for the year of exercise. The resulting AMT credit, recoverable in later years, is not modeled.
Last updated: 2026-08-08 · Tax year 2026
These assumptions follow our general methodology.
Frequently asked questions
Why do ISOs trigger the AMT?
Because the bargain element, the value you gain at exercise, is counted as income for the AMT even though regular tax ignores it until you sell. If that pushes your tentative minimum tax above your regular tax, the difference is due as AMT.
How can I avoid the AMT on ISOs?
Exercise only enough each year to keep your AMT below your regular tax, which this calculator helps you find. Exercising early in the year gives you time to sell before year end if the stock drops, and spreading exercises across years spreads the AMT hit.
Do I get the AMT back?
Often, yes, as a credit. In later years when your regular tax is higher than your AMT, the credit reduces your regular tax, recovering what you paid. It can take several years, so treat the AMT as a timing cost, though a large one up front.
What is the difference between ISOs and NSOs?
NSOs, non-qualified options, are taxed as ordinary income on the bargain element at exercise, with no AMT. ISOs avoid ordinary income at exercise but can trigger the AMT instead. This calculator covers the AMT side that applies to ISOs. The RSU calculator covers a different kind of equity comp.