1. What is AMT Adjustment for ISOs?

The AMT (Alternative Minimum Tax) adjustment for Incentive Stock Options (ISOs) is the difference between the fair market value of the stock at exercise and the exercise price, multiplied by the number of shares. This amount may be subject to AMT in the year of exercise.

2. How Does the Calculator Work?

The calculator uses the AMT adjustment formula:

Where:

• \( FMV \) — Fair Market Value per share at exercise (USD)
• \( \text{Strike Price} \) — Exercise price per share (USD)
• \( \text{Shares Exercised} \) — Number of shares exercised (unitless)

Explanation: This calculation determines the "bargain element" which may be subject to AMT when exercising ISOs.

3. Importance of AMT Calculation

Details: Calculating AMT adjustment helps taxpayers understand potential AMT liability from ISO exercises and plan tax strategies accordingly.

4. Using the Calculator

Tips: Enter FMV and strike price in USD, number of shares exercised. All values must be valid (FMV > 0, strike ≥ 0, shares ≥ 1).

5. Frequently Asked Questions (FAQ)

Q1: When does AMT apply to ISOs?
A: AMT may apply when you exercise ISOs but don't sell the shares in the same calendar year.

Q2: How is AMT credit calculated?
A: AMT credit is the amount of AMT paid that can be credited against regular tax in future years.

Q3: What's the difference between ISOs and NSOs for AMT?
A: Non-qualified stock options (NSOs) don't create AMT adjustments; their bargain element is taxed as ordinary income.

Q4: When should I consult a tax professional?
A: If your AMT adjustment is significant or you're unsure about your tax situation, consult a tax advisor.

Q5: Does selling shares trigger AMT?
A: Selling ISO shares in the same year as exercise may avoid AMT (qualifying disposition).