ISO exercise can trigger AMT on the spread. The AMT premium becomes a credit recoverable in future years when regular tax exceeds AMT. Get the timing wrong and you can owe tax on phantom gains.
Net keep: $321,876
Qualifying disposition plus AMT. Exercise triggers AMT on the spread; you pay the higher of regular and AMT. The AMT premium becomes a credit recoverable in future years when regular tax exceeds AMT. All gain at sale is long-term capital gain. Cash-flow risk: if share price drops below FMV before sale, you may have paid AMT on phantom gains.
2025 AMT exemption: $133,300 MFJ / $85,700 single, phased out above $1.218M / $609k. AMT rate 26% to $232,600, 28% above. LTCG breakpoints 0% / 15% / 20% with NIIT 3.8% above thresholds. Simplified model, ISOs have several edge cases (88-day rule, early exercise, $100k limit) not modelled. Consult a CPA before exercising.
Worth runs ISO scenarios alongside your full tax stack and surfaces the AMT credit recovery timeline. Join the waitlist.
When you pay AMT, the premium (AMT minus regular tax) becomes an AMT credit that carries forward indefinitely. In future years where regular tax exceeds AMT, you can apply the credit to reduce your tax bill. It's a deferred recovery, not a lost cost, but the recovery can take years if your income stays high.
If you exercise ISOs and hold through year-end, AMT is calculated on the FMV at exercise. If the share price drops below FMV before you sell, you've paid AMT on a value you'll never realise. Always consider exercise + same-year sale (disqualifying) if you can't afford the AMT cash.
ISOs are limited to $100k of strike value vesting per year per employee (per the original grant schedule). Vests above the limit are treated as NSO. The calc doesn't model the limit, if you're near it, treat any over-the-cap shares as NSO via the Equity Comp US calculator.