Alternative Minimum Tax Calculator to Help Exercise Your ISOs

The Alternative Minimum Tax (AMT) can really catch people off guard. It was created to ensure that those with higher incomes contribute their fair share, but the truth is, it can affect anyone who has significant capital gains, large deductions, or incentive stock options (ISOs).

If you understand how the AMT operates, you can plan ahead.

This means making smarter investment choices, timing your income more effectively, and knowing when deductions can actually help or hurt you.

I created this Alternative Minimum Tax Calculator. It’s a handy tool to quickly estimate your AMT liability, check if it applies to you, and start brainstorming strategies to lessen its impact before you file.

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What Is the Alternative Minimum Tax (AMT)?

The Alternative Minimum Tax (AMT) is like a backup tax system designed to make sure that high-income earners pay at least a certain amount of tax, even if they have enough deductions and credits that could lower their regular income tax bill. It was initially set up to focus on a small group of wealthy individuals, but it now affects a wider range of people, especially those who take advantage of incentive stock options (ISOs) or have significant itemized deductions.

What sets the AMT apart from the regular tax system is that it restricts or eliminates many of the deductions and credits you might typically use. Instead, it follows its own set of rules to figure out your taxable income.

When Does the AMT Kick In?

AMT generally kicks in when your AMT taxable income exceeds the AMT exemption amount.

This often occurs due to:

• Exercising Incentive Stock Options (ISOs) and holding the stock through year-end.

• Having large state and local tax (SALT) deductions.

• Claiming significant miscellaneous itemized deductions.

• Having depreciation differences or tax-exempt interest from private activity bonds.

For 2025, the AMT exemption amounts are approximately:

Filing Status	AMT Exemption (2025 est.)
Single	$85,700
Married Filing Jointly	$133,300

Thanks to changes made under the 2017 Tax Cuts and Jobs Act (TCJA), the AMT exemption amounts and phaseout thresholds were significantly increased, dramatically reducing the number of taxpayers impacted by the AMT.

For the year 2025, the exemption stands at around $85,700 for individuals and $133,300 for couples filing jointly, with income phaseouts kicking in well above these figures. Although these higher thresholds were initially set to expire in 2025, they are now safeguarded under the OBBBA (One Big Beautiful Bill), with just a few minor adjustments for inflation.

However, starting in 2026, the phaseout rate for the exemption will rise to 50%, meaning that the benefits will decrease more rapidly as income increases. These adjustments help keep relief in place for most taxpayers and simplify the process of complying with the AMT.

If your AMT income exceeds this exemption, you'll need to calculate your AMT liability and pay the greater of your regular tax or AMT.

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Calculate Alternative Minimum Tax

The steps to calculate AMT are:

1. Start with your Adjusted Gross Income (AGI).

2. Add back “AMT preferences and adjustments”, like:

   • ISO bargain element (FMV – strike price)

   • Disallowed state/local tax deductions

   • Miscellaneous itemized deductions

3. This gives you AMTI (Alternative Minimum Taxable Income).

4. Subtract the AMT exemption.

5. Apply AMT tax rates:

   • 26% on the first portion (up to ~$232,600 for joint filers in 2025)

   • 28% on the amount above that

6. Compare the AMT to your regular tax. If AMT is higher, you owe the difference as additional tax.

....looking to exercise your ISOs, feel free to check out our handy calculator below.

*This calculator uses simplified assumptions and does not account for State taxes, multiple ISO exercises, or all filing statuses.

AMT Calculator Assumptions:

• Applies the standard deduction.

• Assumes this ISO exercise is the only AMT preference item.

• Excludes State taxes.

• Assumes no other ISO exercises or AMT preference items during the year.

• Treats income as ordinary income (not long-term capital gains).

• Filing status options are limited to Single or Married Filing Jointly (no support for Married Filing Separately or Head of Household).

Disclaimer:

This calculator is provided for informational purposes only and should not be relied upon as legal, tax, or financial advice. 100bonusdepreciation.com does not provide professional advisory services, and this tool is not a substitute for consultation with a qualified advisor who understands your individual circumstances. By using this calculator, you acknowledge and agree that any decisions or actions you take are at your own risk. 100bonusdepreciation.com makes no guarantees regarding the accuracy, applicability, or completeness of the results, and we are not liable for any loss or damages arising from its use or reliance. This calculator is provided “as is,” without any express or implied warranties, including but not limited to warranties of merchantability, fitness for a particular purpose, satisfactory quality, title, or non-infringement. Some jurisdictions do not allow the exclusion of implied warranties, so certain limitations may not apply to you.