Stock Options ISO/NSO + AMT Calculator (US 2026) — Exercise Tax + AMT Trap

What This Calculator Does

The Stock Options ISO/NSO + AMT Calculator answers the most expensive question startup employees ever face: “If I exercise these options, what does it actually cost me in tax?” Toggle ISO ↔ NSO. The calculator runs the IRS 2026 federal brackets, the Form 6251 AMT computation, and FICA — and tells you exactly what you owe at exercise plus the cash you actually need on hand.

Where most online stock-option tools only model NSO ordinary income (or skip AMT entirely on the ISO side), this one surfaces the Alternative Minimum Tax trap explicitly. Exercise too many ISOs at once and the bargain element pushes your AMTI above the AMT exemption — you owe AMT in a year you haven’t sold any shares. That’s the silent killer for first-time exerciser.

Live recompute, share scenarios via URL, save up to 5 named scenarios. Privacy by default — all math runs in your browser.

ISO vs NSO — The Tax Difference — The Math

AMT — The Trap Most Tools Hide

AMT (Alternative Minimum Tax) runs in parallel to regular federal tax. You owe the GREATER of regular tax or AMT. AMT income (AMTI) adds preference items to your regular AGI — the big one for ISO exercisers being the bargain element.

The exemption phases out at 25¢ per $1 of AMTI above $642k single (or $1.284M MFJ). Beyond a certain bargain size, you lose the exemption entirely. The calculator handles all of this automatically.

A Worked Example — “5,000 ISOs at $4 strike, $40 FMV”

Suppose you’re a single filer earning $180,000 base. Your company’s 409A is $40/share; your ISO strike is $4. You want to exercise 5,000 ISOs.

• Bargain element: ($40 − $4) × 5,000 = $180,000.
• Exercise cost: $4 × 5,000 = $20,000.
• AMTI: $180,000 base + $180,000 bargain = $360,000.
• AMT exemption (single, 2026):$90,300. Phase-out doesn’t kick in (AMTI under $642k).
• Taxable AMTI: $360,000 − $90,300 = $269,700.
• Tentative AMT: 26% × $238,400 + 28% × $31,300 = $61,984 + $8,764 = $70,748.
• Regular federal tax on $180k base: ≈ $32,800.
• AMT liability: $70,748 − $32,800 = $37,948 owed in addition to regular tax.
• State tax on bargain (5%): $9,000.
• Total cash needed at exercise: $20,000 (exercise cost) + $37,948 (AMT) + $9,000 (state) = $66,948.

That’s the trap: $66,948 of cash needed for shares you haven’t sold. Hold ≥ 1 year + ≥ 2 years from grant for qualifying disposition; the AMT becomes a future credit (Form 8801) recoverable when regular tax exceeds AMT in later years.

The AMT-Aware Exercise Tactic

The standard mitigation for the AMT trap is to split the exercise across multiple tax years, sizing each year’s exercise to keep AMTI below the AMT threshold (or below a level where AMT is manageable). The side-by-side panel below the verdict models this:

• 25% of the block — 1,250 shares, bargain $45,000, AMTI $225k → typically $0 AMT (fits within exemption + base brackets).
• 50% — 2,500 shares, bargain $90,000 → small AMT (~$5k).
• 75% — 3,750 shares, bargain $135,000 → moderate AMT (~$20k).
• 100% — 5,000 shares, bargain $180,000 → full AMT trap (~$38k).

Pick the largest tier where AMT is acceptable for your cash situation. Exercise the rest in the next tax year (or the year after) — the math resets each January 1.

NSO Mode

For NSO mode, the math is simpler but often more expensive at exercise:

• Bargain element is W-2 ordinary income — full federal at marginal rate.
• FICA 7.65% applies (SS + Medicare).
• State tax applies at your full rate.
• Withholding usually handled by the employer at the 22% supplemental flat rate — same gap to marginal rate as bonus income (see the Bonus Tax Calculator for the myth-busting math).

For a high-bracket NSO holder, this can mean 35-50%+ of the bargain element disappears at exercise. There’s no AMT trap, but also no LTCG advantage on the bargain portion — only the gain ABOVE FMV (after 1+ year hold) qualifies for LTCG.

Common Mistakes

• Exercising the entire ISO block in one year without modeling AMT. The most expensive mistake — first-time exercisers routinely owe $50-100k+ of unexpected AMT in April. Always run the calc first.
• Confusing strike + exercise cost with total tax. Exercise cost (cash to acquire) is just one part. AMT (or federal/FICA/state for NSOs) is the larger number for most private-company exercises with sizable bargain.
• Selling ISOs before meeting the holding period. The disqualifying disposition rule re-classifies bargain to ordinary income. Wait the full 1 year + 2 years before selling — short of a real cash emergency, this is the difference between paying 20% LTCG and 32-37% ordinary federal.
• Forgetting state-level AMT (CA).California has its own state-level AMT-like computation. The calculator’s flat state rate covers state-tax-on-bargain for most states but not CA’s full state AMT — verify with a CA-licensed CPA for any exercise above ~$100k bargain.
• Not budgeting for the AMT credit recovery timeline. AMT paid in year 1 becomes a credit in future years when regular tax exceeds AMT — but that recovery can take 5+ years. The calculator shows the AMT bill at exercise; the credit is a separate (multi-year) calculation.

For Private Companies — What’s the FMV?

For private (pre-IPO) companies, the FMV is the latest 409A valuation — a third-party appraisal the company commissions every 12 months (or after major events like new funding). HR can give you the current 409A. The IRS uses this number as the FMV for AMT purposes, even though no public market exists.

409A valuations typically lag the preferred-share valuation (investors pay the preferred price; common-share employees get a lower 409A). This is sometimes called the “Section 409A discount.” Use the 409A in the calculator’s FMV input — that’s the IRS basis for AMT.

Save and Share Scenarios

Click Saveto name each scenario (“25% Q1 2026,” “50% Q4 2026,” “Full block”) and store in your browser. Up to 5 saves per calculator. Compare them side-by-side to plan your AMT-aware exercise schedule.

Click Share to copy a URL with your inputs encoded — useful for sending the exact scenario to your CPA or financial advisor before signing the exercise form. Print for a clean 1-page summary you can take to a CPA consultation.

Related Tools

• Tax Calculator — for your baseline regular federal tax (without options) — useful as the floor for the AMT comparison.
• Take-Home Pay Calculator — full pre-tax-deferred net (US/UK/IN), with 401(k), HSA, state tax. Useful for the post-exercise “what’s my new monthly?” view.
• Quarterly Estimated Tax Calculator — if your AMT bill is large enough to warrant quarterly estimated payments (rather than waiting until April), this calc computes the per-quarter top-up.
• Bonus Tax Calculator — same myth-busting math for bonuses and NSO exercises (22% supplemental flat vs marginal rate).

How to Read the Verdict

The number that drives every decision is the cash needed at exercise — strike price plus tax bill — not the paper gain. If the AMT row is non-zero on an ISO scenario, you owe federal tax in a year with zero proceeds; that cash must come from somewhere outside the options.

• NSO ordinary tax under 30% of bargain element. Exercise-and-hold to start LTCG clock if you believe in the equity. Otherwise exercise-and-sell same-day to lock the spread without holding-period risk.
• ISO with AMT > $0.You’re paying tax on a paper gain. Either reduce the exercise quantity until AMT equals zero, OR confirm you can fund the AMT bill from non-option cash — selling the shares same year converts to NSO-equivalent treatment and erases the AMT credit.
• Bargain element above $250K (single) or $500K (MFJ). AMT exemption fully phased out — every additional ISO dollar taxed at the 28% AMT rate. Spread exercises across calendar years to stay under the phase-out.
• Pre-IPO with limited liquidity.Don’t exercise more than you can fund the tax on. Concentration risk + AMT bill on illiquid paper has bankrupted founders in down rounds.