2025 AMT Calculator
Calculate the amount of Alternative Minimum Tax (AMT) you might owe depending on the number of ISOs you exercise.
What your results mean:
AMT (Alternative Minimum Tax) payable is an estimation of the tax you’d owe based on the number of ISOs exercised.
If your AMT payable is 0, your exercise does not hit the threshold to trigger the AMT.
TMT (Tentative Minimum Tax) is the tax you’d owe under the AMT rules:
- When TMT > Regular Tax: You owe AMT
- When TMT ≤ Regular Tax: No additional taxes owed
For Example:
You exercise 10,000 Incentive Stock Options (ISOs) at a $1 strike price, while the Fair Market Value is $6 per share:
- You would recognize $50,000 in AMT income from this ISO exercise
- Your AMT Payable would be: $2,480
- This assumes an income of $100,000 a year
Want to know how many ISOs you can exercise before owing AMT?
How The AMT Calculator Works
Inputs used:
• Shares Exercised – Number of ISOs you exercised this tax year
• Strike Price – The price you paid per share
• Fair Market Value – Per-share value on the date of exercise
• Estimated Income – Your total taxable income for the year
Formula: (FMV – Strike Price) × Shares = AMT Income from Exercise
How to Use This Calculator
This tool helps you estimate how much Alternative Minimum Tax (AMT) you may owe when exercising your Incentive Stock Options (ISOs). Follow the steps below to model your potential AMT liability.
1. Enter your Adjusted Gross Income (AGI)
Adjusted Gross Income is your total income for the year after certain adjustments, such as retirement contributions or student loan interest. It generally includes wages, bonuses, equity compensation, interest, dividends, and other taxable income.
Start by entering your projected AGI for the year. This gives the calculator a baseline for estimating your regular tax and AMT exposure.
2. Select your filing status
Choose the filing status you expect to use when filing your taxes (e.g., Married Filing Jointly, Single). The calculator uses this to apply the correct AMT exemption and estimate your regular federal tax.
3. Add your ISO exercise details
Enter the specifics of the ISOs you plan to exercise:
- FMV of your shares — the fair market value at exercise
- Strike price — what you pay per share
- Number of ISOs exercised — the quantity you intend to exercise
These inputs allow the calculator to determine your ISO spread, the main driver of AMT when exercising options.
4. View your AMT owed
Once all fields are completed, the calculator automatically:
- Computes your Alternative Minimum Taxable Income (AMTI)
- Applies an estimated AMT exemption
- Calculates your Tentative Minimum Tax (TMT) using AMT rates
- Compares it with your estimated regular tax
If AMT applies, you’ll see the estimated AMT owed based on the ISO exercise you entered.
5. Experiment with different exercise scenarios
Adjust the number of ISOs, the FMV, or your income to explore how different exercise amounts affect your AMT liability. This helps you plan the most tax-efficient way to exercise your options.
6. Sign up for a Free Prospect Account
Sign up for a free Prospect account for access to more details, including state taxes, and start earning more from your equity!
Why Use Our Calculator?
- Purpose-built for ISO holders looking to earn more from their equity.
- Calculates AMT exposure using 409A FMV vs strike price.
- Free to use.
Free to sign up. - Updated with 2025 tax year calculations.
What should I do next?
1. Create a free Prospect account
Unlock advanced features—model state taxes, compare filing statuses, explore different ISO exercise scenarios, and project future exit outcomes.
2. Plan your ISO exercises strategically
The timing of when you exercise and sell ISOs has a major impact on AMT. Running scenarios before exercising can help you minimize, or even avoid, AMT altogether.
3. Watch out for AMT-sensitive investments
If you’re consistently subject to AMT, be cautious with investments that generate tax-exempt interest — these can increase your AMT liability.
4. Update your estimated tax payments
If this calculator shows that you may owe AMT, consider adjusting your estimated quarterly payments or your W-4 withholding to avoid an unexpected bill or underpayment penalties.
5. Understand the AMT credit
If you pay AMT because of ISO exercises, you may qualify for an AMT credit in future years when the shares are eventually sold. Claiming the credit can be complex, so professional tax guidance is often helpful. You can also track AMT credits and forecast when you can use them in Prospect.
What is the Alternative Minimum Tax (AMT)?
The Alternative Minimum Tax is a parallel tax system created to ensure that taxpayers with high deductions still pay a minimum amount of tax. Each year, you calculate your taxes under two systems:
- Regular tax, which includes standard deductions, credits, and common adjustments
- AMT, which limits or removes many of those deductions and applies a different set of rules
You then pay the higher of the two. AMT is not an additional tax layered on top—it simply replaces your regular tax if the AMT formula results in a larger number. Because its rules differ from the regular tax system, the AMT can feel confusing, especially for people with equity compensation.
Why AMT matters for startup employees
For many startup employees, AMT becomes relevant when exercising Incentive Stock Options (ISOs). Even without selling any shares, the IRS views the spread—FMV minus strike price—as income for AMT purposes. This often creates “phantom income,” meaning you can owe taxes on value you haven’t realized in cash.
Because early-stage startup valuations can shift significantly from year to year, even small timing changes can create large AMT differences. Understanding how the numbers interact—your adjusted gross income, the company’s FMV, the number of options exercised, and your filing status—helps you avoid unexpected tax bills and make informed decisions about when and how much to exercise.
Tools like this calculator are designed to give you clarity before you take action, helping you weigh risk, tax impact, and possible upside as your company grows.
Powerful tools to earn more from your equity
Frequently Asked Questions
Joining Anduril as an employee is another way to acquire equity, typically through stock options included in compensation packages.
How does the ISO spread impact AMT?
The ISO spread—FMV minus strike price at exercise—is treated as income for AMT purposes, even if you don’t sell your shares. This amount gets added to your Alternative Minimum Taxable Income (AMTI), which can push you above the AMT exemption and cause you to owe AMT for the year.
What happens if the company’s 409A valuation increases?
If your company’s 409A Fair Market Value goes up, the ISO spread gets larger for any future exercises. A higher spread means higher AMT income, which can either trigger AMT for the first time or increase the amount you owe. Many employees choose to exercise earlier in the year or before major valuation updates to manage AMT exposure.
Does exercising fewer shares lower AMT?
Yes. Because AMT is driven by the total ISO spread, exercising fewer shares reduces AMTI and can keep you below the AMT threshold. Many people exercise ISOs across multiple years to avoid a large single-year AMT bill.
Is AMT owed immediately when I exercise ISOs?
No. AMT is calculated and paid when you file your annual tax return for that year. However, because ISO exercises do not trigger withholding, taxpayers often need to increase estimated quarterly payments or adjust W-4 withholding to avoid underpayment penalties.
Does selling ISO shares in the same year avoid AMT?
If you exercise and sell ISOs in the same calendar year (a “disqualifying disposition”), the ISO spread is taxed as regular income instead of AMT income. This generally avoids AMT, but it also means the gain is taxed at ordinary income rates rather than long-term capital gains.
What is AMTI (Alternative Minimum Taxable Income)?
AMTI is your income after AMT adjustments, including adding back ISO spread, removing certain deductions, and applying AMT-specific rules. Once AMTI is computed, you subtract the AMT exemption and apply the AMT tax rates (26%/28%) to determine Tentative Minimum Tax.
Does AMT depend on my filing status?
Yes. Both the AMT exemption amount and its phase-out thresholds depend on whether you file as single, married filing jointly, married filing separately, or head of household. Filing status can significantly change how many ISOs you can exercise before hitting AMT.
Can I avoid AMT by exercising early in the year?
Exercising early doesn’t change how AMT is calculated, but it gives you more certainty. Early in the year, you have better visibility into income, bonus, RSU vesting, and other variables that affect AMT. Some people also exercise early to start the long-term capital gains clock sooner.
What happens if my AMT is lower than regular tax?
If your Tentative Minimum Tax is less than your regular tax, you do not owe AMT. Your tax liability is simply your regular tax, and AMT adjustments have no effect on your bill for that year.
Does AMT apply if my ISOs are underwater?
No. If the Fair Market Value is equal to or below the strike price, the ISO spread is zero or negative, which means it does not contribute to AMT. Exercising underwater options generally has no AMT impact (though it may still carry economic risk).
How do capital gains affect AMT?
Long-term capital gains and qualified dividends are taxed at preferential rates under both regular tax and AMT. However, large capital gains can push AMTI high enough to phase out the AMT exemption, indirectly increasing AMT liability even though the gains themselves don’t change tax rates.
Why can AMT be higher than regular tax even with fewer deductions?
The AMT system disallows certain deductions—including state income tax, miscellaneous itemized deductions, and personal exemptions—and treats ISO spread as income. This can shrink your deductions while increasing your income, causing your AMT liability to exceed your regular tax even if your taxable income didn’t change.
If I have Non-Qualified Stock Options (NSOs), does AMT apply when I exercise NSOs?
No. Exercising NSOs does not trigger the Alternative Minimum Tax (AMT). NSOs are taxed as ordinary income at the time of exercise, and that income is reported on your W-2. AMT generally applies only to Incentive Stock Options (ISOs), not NSOs.
