How much alternative minimum tax will an ISO exercise cost?

The alternative minimum tax is not a rate on your income. It is a second, parallel calculation of the same year, and you pay the difference when it comes out higher. At the inputs above, $250,000 of wages filing single produces $234,250 of taxable income and $52,023 of regular tax. The second calculation starts from that same $234,250, adds back the $15,750 deduction you took, and adds the $150,000 bargain element from the exercise, reaching $400,000 of alternative minimum taxable income.

From there, an exemption of $88,100 comes off, leaving $311,900 for the AMT rates: 26% up to $239,100 and 28% above it. That produces a tentative minimum tax of $82,550. Line 11 of Form 6251 is the subtraction that matters: $82,550 minus the $52,023 of regular tax is $30,527, and that is the AMT. It is charged on top of the regular tax, not instead of it, so the federal bill for the year goes from $52,473 without the exercise to $83,000 with it.

Notice what is missing from that story: cash. Exercising and holding produces no proceeds. You wrote a check for the strike price, you own shares you cannot necessarily sell, and now you owe $30,527 in April on a gain you have not realized. That is the entire reason this page leads with a ceiling instead of a tax.

The number at the top is the largest bargain element that still owes zero AMT at your inputs: $38,188 here. Below it the tentative minimum tax stays under your regular tax and Form 6251 line 11 is zero. Above it, every dollar is charged. The calculator finds that boundary by computing the whole return at candidate spreads and narrowing until one dollar separates a spread that owes nothing from one that does.

It searches rather than solves because the cost of a dollar of spread is not constant. It is 26 cents at first, 28 cents once AMT income passes $239,100, and steeper again inside the exemption phase-out. Where those pieces meet your regular tax depends on all of it at once. You can watch the boundary work: at $38,188 of bargain element the AMT is $0.00, and at $38,189 it is $0.14. That is the line, to the dollar, computed rather than estimated.

The practical use is a share count. Divide $38,188 by the difference between the current share price and your strike price, and that is how many options you can exercise this calendar year without an AMT bill. Exercising in January rather than December buys you the option of a second tranche next year against a fresh ceiling, which is the whole strategy behind exercising early and often.

The ceiling is not a fixed number and it does not rise smoothly with income. This table holds the advanced inputs at zero and changes only ordinary income and filing status, reporting the AMT-free bargain element in each case.

Read down the single column and the room dips before it climbs: $100,000 of income allows $39,850, $150,000 allows $34,511, and $400,000 allows $76,731. Two forces pull against each other. More ordinary income raises your regular tax, which is the bar the tentative minimum tax has to clear, so it buys room. It also raises AMT income dollar for dollar, which spends room. Which one wins depends on whether your regular bracket is above or below the AMT rate you are facing, and that flips as you move up the schedule.

Across the row, filing status changes the answer by more than any single input. At $250,000 of income a single filer has $38,188 of room and a married filing jointly filer has $33,669, because status sets both the exemption and the regular tax on the same salary. Married filing separately is priced in the calculator above and is the harshest of the five: it takes half the joint exemption and starts phasing it out at half the joint income.

Because line 11 is a subtraction, anything that raises your regular tax lowers your AMT one for one, and anything that lowers your regular tax hands the saving straight back. This is the part that surprises people, and it is measurable. Hold the $150,000 exercise fixed and raise ordinary income from $250,000 to $400,000: regular tax goes from $52,023 to $104,035, and the AMT falls from $30,527 to $20,515. A raise makes your AMT smaller.

The state and local tax deduction runs the same way, and it is the cleanest illustration on the page. Add $100,000 of state tax paid to the inputs above. Itemizing now beats the standard deduction, so the deduction on Form 1040 goes from $15,750 to $40,000, which is the cap, and regular tax falls from $52,023 to $44,263. A saving of $7,760. But Form 6251 line 2a adds every dollar of that deduction back, so the AMT rises from $30,527 to $38,287. Total federal tax: $83,000 before, $83,000 after. Identical. In an AMT year the state tax deduction is worth nothing at all.

The same logic makes charitable giving, retirement contributions, and any other deduction less valuable in an AMT year than a bracket table suggests, and it makes accelerating income into the year of a big exercise less painful than it looks. The drivers under the calculator measure each of these on your own numbers by running the return twice and reporting the difference, rather than asserting a rule.

The exemption is not permanent. It phases out at 25 cents for every dollar of AMT income above $626,350 for a single filer, and is gone entirely at $978,750. Inside that range a dollar of bargain element does two things: it gets taxed, and it removes 25 cents of exemption which then also gets taxed. The effective rate is the AMT rate times 1.25.

Take the same inputs with a $500,000 bargain element instead. AMT income reaches $750,000, past the $626,350 threshold, so the exemption drops from $88,100 to $57,188: a loss of $30,913. The AMT comes to $137,183, and the next $1,000 of spread costs 35.0% rather than the 28% you would read off a rate table. That marginal figure is measured by computing the return again at a slightly larger spread, which is why it is right in the phase-out range where a lookup is wrong.

This is the argument for splitting an exercise across calendar years rather than doing it in one go. Two exercises that each stay inside the cheap part of the schedule cost less than one that runs through the phase-out, even before the AMT-free ceiling in each year is counted.

State AMT. California charges its own alternative minimum tax at 7% with its own exemption and its own phase-out, and it hits ISO exercises the same way the federal one does. For a California filer that is often a third again on top of the number here. Nothing on this page includes any state tax.

The minimum tax credit. The $30,527 above is a cash cost this year, not a permanent one. AMT paid on an ISO exercise becomes a credit under section 53 that you claim on Form 8801 in later years, when your regular tax runs above your tentative minimum tax. This engine is line-ready for that form rather than computing it, so the page reports what you owe now and does not net out a credit it cannot size.

What happens to the shares. Selling before December 31 of the year you exercised is a disqualifying disposition: the spread stops being an AMT adjustment and becomes ordinary wage income, which is a different return from this one and the usual way out of a bill you cannot pay. A sale in a later year has its own capital gains treatment and a separate AMT basis. Neither is modeled here.

Anything that needs Form 6251 Part III. Capital gains and qualified dividends are taxed at preferential rates inside the AMT too, through a worksheet this page does not run, so the inputs are wage income plus the exercise and nothing else. Filing separately has a section 55(d) addback above the point where the exemption is fully gone that this engine does not apply; the calculator raises a warning and calls the number a floor when you are in that range. Everything here is federal, for tax year 2025 only, at current parameters rather than a history of past years, and none of it is tax advice.

This calculator is built to be used without a browser. Every input is a query parameter on this page, and the same parameters on the JSON twin return the complete answer as a document.

GET /tools/amt.json?income=250000&iso=150000&status=single

The response carries inputs after parsing and clamping, result with the alternative minimum tax, whether it applies, isoRoom, the largest bargain element that owes none of it, plus the room left or the overshoot, the tentative minimum tax and the regular tax it is compared against, AMT income, the exemption with its phase-out thresholds, total federal tax with and without the exercise, a measured marginal rate on the next $1,000 of spread, and form6251, the numbered lines the answer is built from, plus sensitivity across a ladder of exercise sizes and across all five filing statuses with each status's own ceiling, drivers ranked by effect with a plain sentence each, assumptions that say for every field whether you supplied it and name the source when the default came from one, sources with a URL and an as-of date for each source the tool cites, which is an empty list on the calculators whose every default is an example input rather than a published figure, warnings, a disclaimer, and in tool the canonicalUrl and jsonUrl that carry only your non-default parameters. The canonical URL is the answer's permanent address; use it when you cite the number.

Parameters, all optional, in any order:

• income ($ per year), default $250,000 per year.
• iso ($), default $150,000, from IRS Form 3921, Exercise of an Incentive Stock Option.
• salt ($ per year), default $0 per year, from One Big Beautiful Bill Act (P.L. 119-21).
• pab ($ per year), default $0 per year, from IRS Instructions for Form 6251.
• status (one of single, married-joint, married-separate, head-of-household, qualifying-surviving-spouse), default single.

Values accept plain numbers and loose human formats such as 100k, $100,000, or 6.5%. Unknown parameters are ignored, values outside a field's range are clamped and reported in warnings, and the endpoint never fails on bad input. Responses are cacheable for a day; the defaults change when their sources publish, and tool.version changes when the method does.

• IRS Rev. Proc. 2024-40 (2025 inflation-adjusted items), as of 2025-01-01. The AMT exemption amounts, the income where the exemption starts phasing out, and the point where the 26% AMT rate becomes 28%, for tax year 2025.
• 26 U.S.C. (Internal Revenue Code), as of 2025-01-01. The sections this page computes and cites: § 55 the alternative minimum tax, § 56(b)(3) the ISO exercise adjustment, § 53 the minimum tax credit, and § 422 the rules that make an option incentive stock.
• IRS Instructions for Form 6251, as of 2025-01-01. The form itself: the line numbers this page walks, which adjustments go on which line, and the order they are applied in.
• IRS Form 3921, Exercise of an Incentive Stock Option, as of 2025-01-01. The statement your employer files when you exercise. Boxes 3, 4, and 5 are where the bargain element on this page comes from.
• One Big Beautiful Bill Act (P.L. 119-21), as of 2025-07-04. The statute behind the 2025 standard deduction and the $40,000 cap on the state and local tax deduction, both of which change what the AMT adds back.

These are the parameter authorities the engine itself reports for every computation, not citations chosen after the fact. The AMT exemption, its phase-out thresholds, and the rate breakpoint come from the IRS revenue procedure and the statute that set them; the code sections are the rules the calculation implements. When the engine loads a different parameter set, this list changes with it.

Carlo is a personal finance agent. It knows your accounts, debts, and goals, so instead of a worked example at the spread you typed it can watch your actual income through the year, and tell you in October how much room you have left before December 31 closes it. Text it the question.

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