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AMT & credits
ISOs
ISOs and the AMT: the complete guide
Exercising and holding ISOs can hand you a cash tax bill on a gain you never sold, and this is the whole story of how that happens and how to plan around it.
How ISOs work
Incentive stock options can turn your entire gain into long-term capital gains, no ordinary income at all. The path is narrow, every step has a deadline, and this is the whole map from grant to sale.
Planning the ISO exercise year
Exercise up to the point where AMT kicks in, early in the year, then stop and repeat. The whole strategy is choosing how much spread to recognize, when to hold, and when to sell, on purpose.
Form 3921 and Form 6251 for ISOs
One form your employer mails you, one form where the AMT shows up, and one form where the sale gets reported three different ways. Get them aligned and the ISO surprise loses its power.
Case study: exercising pre-IPO ISOs
An early employee exercised before the IPO and made an AMT bet that paid off. The lesson is in why it worked, not that it did.
ISO AMT estimator
Estimate the alternative minimum tax a planned ISO exercise would trigger this year, before you write the check to exercise.
ISO exercise cost calculator
Add up the strike price and the AMT so you know the full cash cost of exercising your ISOs, not just the sticker price.
Case study: the 90-day scramble after leaving
An employee left with $90k of in-the-money ISOs and 90 days to find the cash, or lose them.
Case study: the AMT trap when the stock crashed
A worker owed AMT on a paper gain, then the shares fell 70%. Here is what he did next and what would have saved him.
Case study: what happens to ISOs in an acquisition or IPO
A liquidity event finally lets you sell, and that is exactly when ISO holders make their most expensive mistakes. The money showing up is not the same as the money you keep.
Case study: a disqualifying ISO sale to diversify fast
Why one founder chose ordinary income over holding a single volatile stock for the lower rate.