About the ISO Exercise Calculator
This ISO exercise calculator estimates what it really costs to exercise incentive stock options and hold the shares. Enter the number of options, the strike price, the current fair market value, your expected sale price, your filing status and your regular taxable income, and it returns the cash needed to exercise, the bargain element, the alternative minimum tax (AMT) the exercise is likely to trigger, how many shares you could exercise before AMT applies, and the federal tax on a qualifying versus a disqualifying sale.
ISOs get special treatment: exercising them creates no regular income tax, but the spread between the fair market value and the strike is an AMT preference item if you still hold the shares at year end. If you then hold the shares more than two years from grant and more than one year from exercise (a qualifying disposition), the whole gain over the strike is taxed at long-term capital gains rates. Selling sooner (a disqualifying disposition) turns the spread into ordinary wage income.
Figures are for tax year 2026, from IRS Revenue Procedure 2025-32: AMT exemptions of $90,100 (single and head of household), $140,200 (joint) and $70,100 (separate), phased out above $500,000 ($1,000,000 joint), the 28% AMT rate above $244,500, and the 2026 ordinary and capital gains brackets. The estimate is federal only and ignores state tax, the 3.8% net investment income tax, other AMT adjustments beyond your deduction, and the AMT credit you may recover in later years.
With the default inputs, the amt triggered by the exercise is $17,162.00. Change any value above to recalculate instantly.
How to use the iso exercise calculator
- 1Choose your filing status and enter your expected 2026 taxable income before any ISO exercise.
- 2Enter the number of options, the strike price and the current fair market value (409A value if private).
- 3Pick standard or itemized deductions (enter your SALT deduction if you itemize).
- 4Read the AMT triggered, total cash needed and how many shares you could exercise AMT-free.
- 5Enter an expected sale price to compare the tax on a qualifying and a disqualifying sale.
Formula and method
Exercising ISOs and holding the shares past December 31 adds the bargain element — fair market value minus strike, times shares — to alternative minimum taxable income (AMTI). AMTI also adds back the standard deduction (or state and local taxes if you itemize). The 2026 exemption is subtracted after being reduced by 50 cents for each dollar of AMTI above the phase-out threshold, the remainder is taxed at 26% up to $244,500 ($122,250 separate) and 28% above, and you owe AMT only to the extent this tentative minimum tax exceeds your regular tax. The AMT shown is the increase caused by the exercise. The AMT-free figure is found numerically: the spread at which tentative minimum tax exactly equals regular tax.
For a qualifying disposition (more than 2 years after grant and 1 year after exercise), the gain (sale price − strike) × shares is taxed at 0%, 15% or 20%, stacked on top of your ordinary taxable income using the 2026 thresholds. A disqualifying sale in the same year as exercise is taxed as ordinary income at your regular rates and triggers no AMT. Both assume your other income stays the same in the sale year.
- FMV
- Fair market value per share on the exercise date
- AMTI
- Alternative minimum taxable income
- TMT
- Tentative minimum tax
- Exemption
- $90,100 single/HoH, $140,200 joint, $70,100 separate (2026), less 50% of AMTI over $500,000 ($1,000,000 joint)
Worked examples
Single, $150k taxable income, 2,000 ISOs at $5 with FMV $55
Regular tax on $150,000 is $28,598. AMTI is $150,000 + the $16,100 standard deduction + the $100,000 spread = $266,100; minus the $90,100 exemption leaves $176,000 × 26% = $45,760 of tentative minimum tax, so AMT is $17,162. Only about 679 shares (roughly $34,000 of spread) fit under the AMT crossover. Selling later at $80 in a qualifying disposition taxes the $150,000 gain at 15% ($22,500), versus $45,171.25 as ordinary income in a same-year sale.
Married filing jointly, $300k income, 5,000 ISOs at $10 with FMV $30
Regular tax on $300,000 joint income is $57,196. AMTI is $300,000 + $32,200 + $100,000 = $432,200; after the $140,200 exemption the $292,000 base is taxed at 28% minus $4,890, giving $76,870 of tentative minimum tax, so the exercise triggers $19,674 of AMT and needs $69,674 of cash in total. Only about 1,399 shares could be exercised AMT-free.
Small exercise that stays under the AMT line
A $9,000 spread is well inside the AMT-free room for a single filer with $120,000 of taxable income, so the exercise only costs the $1,000 strike. A qualifying sale at $20 would owe 15% on the $9,000 gain, or $1,350, versus $2,160 at the 24% ordinary rate.
Frequently asked questions
Do you pay tax when you exercise ISOs?+
Not regular income tax. But if you exercise and still hold the shares at year end, the spread between fair market value and the strike is added to alternative minimum taxable income, which can trigger AMT. Exercising and selling in the same calendar year avoids AMT but makes the spread ordinary income.
What is a qualifying disposition of ISO shares?+
A sale more than two years after the option grant date and more than one year after the exercise date. The entire gain over the strike price is then taxed as a long-term capital gain (0%, 15% or 20% federally, plus possibly the 3.8% NIIT), and none of it is wage income.
What are the 2026 AMT exemption amounts?+
For 2026 the AMT exemption is $90,100 for single and head-of-household filers, $140,200 for married filing jointly and $70,100 for married filing separately. It phases out at 50 cents per dollar of AMTI above $500,000 ($1,000,000 joint), and the 28% rate applies above $244,500 of AMT base.
Can I get ISO AMT back?+
Often, yes. AMT caused by ISO exercises is a timing difference, so it generates a minimum tax credit (Form 8801) that you can use in later years when your regular tax exceeds your tentative minimum tax — typically the year you sell the shares and in following years.
How many ISOs can I exercise without paying AMT?+
Enough that your tentative minimum tax stays at or below your regular tax. This calculator solves for that crossover point and converts it into a number of shares. Higher regular income generally means more AMT-free room, until the exemption phase-out begins.
What is the $100,000 ISO limit?+
Only options covering up to $100,000 of stock (valued at the grant-date price) that first become exercisable in any one calendar year can be treated as ISOs. Any excess is treated as non-qualified stock options, taxed as ordinary income at exercise.
Tax results are estimates based on published rules and simplified assumptions. They are not tax advice — check official guidance or a tax professional for your situation.