Estimate whether you're subject to AMT and how much additional tax you may owe.
The AMT exists because Congress in 1969 was unhappy that 155 high-income households paid zero federal tax. It survives in 2026 as a parallel tax system intended to catch high earners who use too many preference items. Post-TCJA, it affects far fewer people — but for the ones it does affect (typically large ISO exercises and very high incomes), it can produce a six-figure surprise.
Pre-TCJA, AMT was an upper-middle-class tax: roughly 5 million households paid it because the exemption was not indexed to inflation and SALT deductions were a huge preference item. After TCJA: SALT capped at $10K (less to add back), AMT exemption raised dramatically, phase-out moved up sharply, and the standard deduction nearly doubled. Result: AMT filings dropped roughly 96%. AMT now mostly affects very high earners with large ISO spreads, complex partnership preferences, or large private activity bond interest.
Regular Taxable Income
+ SALT add-back
+ ISO exercise spread
+ Other preference items (PABs, depreciation differences, etc.)
= AMTI
− AMT Exemption (phased out at high AMTI)
= AMT Base
× 26% up to $232,600, then 28%
= Tentative Minimum Tax
− Regular Tax
= AMT Owed (if positive)
| Filing status | Exemption | Phase-out starts | Fully phased out |
|---|---|---|---|
| Single / HOH | $85,700 | $609,350 | $952,150 |
| Married filing jointly | $133,300 | $1,218,700 | $1,751,900 |
| Married filing separately | $66,650 | $609,350 | $875,950 |
Worked example: $200K of regular taxable income + $300K ISO exercise spread (you exercised 10,000 options at a $30 spread) = $500K AMTI. Subtract $85,700 exemption = $414,300 base. AMT: 26% × $232,600 + 28% × ($414,300 − $232,600) = $60,476 + $50,876 = $111,352 tentative minimum tax. If your regular tax was $40K, you owe an extra $71K in AMT — due in April even though the stock was never sold. This is the textbook ISO disaster, and exactly why early-exercise modeling matters before pulling the trigger.
The good news: AMT paid because of "timing" items (ISO spread, accelerated depreciation) creates a credit that reduces regular tax in future years when the regular calculation exceeds the tentative minimum tax. So in many cases the AMT is a cash-flow prepayment, not a permanent loss. The bad news: the credit is non-refundable (only offsets regular tax, not back to zero) and recovery can take many years. Track it on Form 8801 every year — many taxpayers forget about the credit and leave it on the table.
You're supposed to run the calculation; you're only required to file Form 6251 if AMT applies or to claim/calculate the MTC. Most tax software runs the check automatically.
No — LTCG keeps its preferential 0/15/20% rates for AMT purposes. However, big LTCG can push AMTI into the phase-out zone, eroding the exemption.
The corporate AMT was repealed by TCJA, then partially re-enacted by the Inflation Reduction Act (2022) as a 15% book-income minimum tax on corporations with $1B+ average book income. It doesn't apply to small or mid-size companies.
Often yes — exercising up to roughly the exemption amount in spread per year keeps you below the AMT line. This is the most common ISO-planning strategy.
Same-year disqualifying disposition: regular tax applies to the spread as ordinary income, and AMT preference is removed for that exercise. Trade-off: lose long-term capital gains treatment for the stock.
Yes — the exemption, phase-out, and 26%/28% breakpoint are all inflation-indexed since 2013. Before that, lack of indexing was a huge driver of pre-TCJA AMT creep.
Educational only; not tax advice. Reviewed by Marcus Tan, CPA, on March 1, 2026.