Try our simple Alternative Minimum Tax (AMT) Calculator! We just need 5 inputs to provide an estimated AMT impact for your ISO exercise.
What is AMT tax?
If you exercise incentive stock options (ISOs) you may owe alternative minimum tax (amt) come tax season. Unlike ordinary income (which affects NSOs), AMT treats the spread between your strike price and the fair market value at the time of exercise as income. Thus if you exercise ISOs where the FMV is greater than your strike price, it is possible you will owe AMT.
Go ahead and try out our simple AMT Calculator that only needs a few inputs (number of options, strike price, fair market value, income level, state, and marriage status). Feel free to reach out if you have any questions!
For questions regarding this AMT Calculator, please feel free to email: firstname.lastname@example.org
How this calculator works:
- Begins with Total Income
- Subtracts the Standard Deduction
- Calculates Regular Federal Income Tax based on the value from #2 and your state/filing status
- Calculates ISO Spread from the number of options, strike price, and FMV
- Adds ISO Spread to Total Income to arrive at Alternative Minimum Tax Income (AMTI)
- Subtracts AMT Exemption
- Calculates AMT based on #6 and your state/filing status
- If AMT (#7) is greater than Regular Federal Income Tax (#3) then AMT Owed = AMT-Regular Income Tax. If not, you may not owe any AMT!
Letting ESO Fund the Exercise and Taxes
Since the cost of exercising stock options is already very high, the addition of taxes makes the entire investment even more risky. A solution for reducing this risk is obtaining funding from the ESO Fund to cover the entire cost of exercising your stock options, including the tax. You retain unlimited upside potential without risking any of your personal capital. If you exercised your ISO stock options earlier this year and are concerned with the tax burden next year, then ESO is an ideal solution since we can provide money for the AMT and even reimburse your exercise costs.
You retain title to the stock in an ESO transaction. Since you don't have to transfer the stock or pledge it as collateral, this greatly simplifies the paperwork needed to obtain funding from ESO. You also retain the ability to pay off ESO at any time before the company exits. For more information on reducing stock option taxes or regarding how ESO can benefit you, please contact us below.