ISO Exercise & AMT
Tax hit when you exercise incentive stock options — bargain element + AMT.
| Strategy | Shares | Exercise $ | Incr AMT | Total cash |
|---|---|---|---|---|
| Exercise all now | 10,000 | $10,000 | $0 | $10,000 |
| AMT-safe this year | 10,000 | $10,000 | $0 | $10,000 |
Ask anything about your result
The math above is deterministic. AI explains what it means — it never recalculates the numbers.
About
Exercising incentive stock options (ISOs) doesn't trigger ordinary income tax — but the spread between strike and fair market value (the 'bargain element') is an AMT preference item. This calculator estimates the AMT hit so you don't get blindsided by a five- or six-figure tax bill in April for shares you can't sell.
How it works
- 01Enter the number of ISOs you're exercising, your strike price, and the current 409A FMV.
- 02Bargain element = (FMV − strike) × shares. This is added to your AMT income, not regular income.
- 03We compare regular tax vs AMT given your other income — you pay whichever is higher.
- 04If AMT exceeds regular tax, the difference is your incremental ISO cost (and may generate an AMT credit for future years).
Examples
10,000 ISOs at $1 strike, $5 FMV
Bargain element: $40,000. At $200k W-2 income, this adds ~$10–11k AMT on top of regular tax. Cash needed: $10k exercise + $10–11k tax = ~$20k.
Early exercise pre-409A bump
Exercising before the FMV moves materially keeps the bargain element near zero — no AMT. This is the case for an 83(b) early exercise on a brand-new grant.