Compute Alternative Minimum Tax, runs parallel to regular tax. You pay the higher.
AMT due (above regular)
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AMT (parallel)
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AMT exemption
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A second tax system running quietly in the background
The Alternative Minimum Tax is not an extra tax bolted onto your regular bill. It is a complete parallel calculation of what you owe, built on a wider definition of income and a flatter rate structure, and the rule is blunt: you compute your tax both ways and pay whichever is higher. Congress created it so that high earners stacking deductions and preference items could not zero out their liability. After the 2017 tax law raised the exemptions sharply, the AMT stopped touching the upper middle class and now lands mostly on a narrower group, with one trigger standing out above all others.
This calculator takes your Alternative Minimum Taxable Income, applies the 2026 exemption for your filing status, and runs the result through the two AMT rates. Then it compares the tentative AMT against the regular tax you enter. The 2026 exemption is $90,100 for single and head-of-household filers, $140,200 for married couples filing jointly, and $70,100 for married people filing separately.
Two flat rates and a vanishing exemption
Once the exemption comes off, the AMT applies two rates: 26% on the AMT base up to $244,500 and 28% above it. For married filing separately, the 28% rate begins above $122,250. Starting in 2026, the exemption shrinks by 50 cents per dollar of AMTI above $500,000 for single, head-of-household, and married-filing-separately returns, or above $1,000,000 for joint returns. The example below is under the phase-out threshold and receives the full exemption.
An ISO exercise that pulls a single filer into AMT
The textbook trigger is exercising incentive stock options and holding the shares past year-end. The bargain element, the spread between strike and fair market value, is invisible to regular tax that year but is a preference item that inflates AMTI. Say a single filer ends up with $400,000 of AMTI after that spread, against $60,000 of regular tax. Here is the calculation.
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Subtracting the $90,100 exemption leaves a $309,900 AMT base. Tax is $63,570 on the first $244,500 at 26%, plus $18,312 on the remaining $65,400 at 28%, for tentative AMT of $81,882. Because that exceeds the $60,000 regular tax, the additional AMT is $21,882.
The credit that gives the money back, slowly
AMT paid because of timing differences like an ISO exercise is not gone forever. It generates a minimum tax credit, claimed on Form 8801, that you carry forward and use in future years when your regular tax exceeds your tentative AMT. In effect the ISO AMT is often a prepayment rather than a permanent surcharge. The catch is that recovering it can take many years and depends on your regular tax outrunning the AMT in later years, so the cash crunch in the exercise year is very real even when the long-run cost is smaller. AMT is reported on Form 6251, and anyone exercising ISOs should run this calculation before December 31, when there is still time to sell some shares in a disqualifying disposition and pull the spread back under regular tax.
What counts as AMTI versus regular taxable income?
AMTI starts from regular taxable income and adds back items the AMT does not allow, then layers in preference items. The big add-backs are the state and local tax deduction (disallowed entirely under AMT) and the ISO bargain element. Items like the standard deduction are also added back. This tool asks you to enter AMTI directly so it stays accurate regardless of which preferences apply to you, but if you are estimating, remember that a large SALT deduction or a big ISO spread is usually what drives the two figures apart.
Does selling ISO shares in the same year avoid AMT?
Yes, generally. If you exercise and sell in the same calendar year, the transaction becomes a disqualifying disposition and the spread is taxed as ordinary income under the regular system rather than counted as an AMT preference. You lose the chance at long-term capital gains treatment on the spread, but you sidestep the AMT cash trap. Whether that trade is worth it depends on the share price and your conviction, which is a planning conversation worth having with a CPA before year-end.