ISO AMT: how much you can exercise in 2026 before the AMT starts

Exercising incentive stock options (ISOs) creates no regular income tax. But if you keep the shares past December 31, the spread counts as income for the alternative minimum tax (AMT). You owe AMT only if that lifts your tentative minimum tax above your regular tax.

You often have some room before that happens. In 2026, a single filer with $250,000 of wages can exercise about $37,400 of spread with no AMT due. Find your own room before December 31, 2026, when the tax year closes.

The ISO spread	Value at exercise minus the price paid
Where it goes	Form 6251, line 2i
2026 AMT exemption	$90,100 single, $140,200 joint
Exemption shrinks above	$500,000 single, $1,000,000 joint
AMT rates	26%, then 28% above $244,500
Sold in the same year	No AMT adjustment
Rules checked	October 30, 2026

Is there an AMT tax on the exercise of an ISO?

There can be, if you keep the shares past the end of the year. For the AMT, the tax code switches off the ISO rule that makes an exercise tax-free. The spread then counts as AMT income. The timing depends on the shares.

• Vested shares you keep past December 31. The spread on the exercise date counts as AMT income for the year you exercised.
• Unvested shares from an early exercise. The spread counts when the shares vest, at their value then. An 83(b) election filed within 30 days counts it at exercise instead, which is zero if you paid full value.
• Shares you sell in the same year. There is no AMT adjustment. The regular tax counts the spread as wages instead, or your actual gain if that is smaller.
• Shares you sell in a later year. Your AMT basis is the price you paid plus the spread, so the AMT does not count the spread twice.

How much can you exercise before the AMT starts?

You can exercise until your tentative minimum tax catches up with your regular tax. Take a single filer in 2026 with $250,000 of wages and the $16,100 standard deduction. Here is the AMT on different spreads.

Spread kept at year end	AMT due
$37,400	$0
$100,000	$16,578
$250,000	$58,578
$400,000	$121,578

Their regular tax is $51,304. With no exercise, AMT income is the $250,000 of wages, because the standard deduction is added back. After the $90,100 exemption, the tentative minimum tax at 26% is $41,574.

The $9,730 gap between the two covers about $37,400 of spread. Past that, each extra dollar of spread costs 26 cents, then 28 cents. Above $500,000 of AMT income, it costs 42 cents, because the exemption also shrinks. At a $400,000 spread, only $15,100 of exemption is left.

How do I know if I have to pay AMT?

You owe AMT if your tentative minimum tax on Form 6251 is higher than your regular tax. Here is how to check before you exercise.

1. Find the spread. On Form 3921, take box 4 (the value per share at exercise) minus box 3 (the exercise price), times box 5 (the shares).
2. Find your AMT income. Start with taxable income, then add back the standard deduction or the state and local taxes you deducted. Add the spread.
3. Subtract the exemption. For 2026 it is $90,100 single or $140,200 joint. It drops 50 cents for each dollar of AMT income above $500,000, or $1,000,000 joint.
4. Compare the two taxes. Tax the rest at 26%, and at 28% above $244,500. If that is more than your regular tax, the difference is your AMT.

How do I exercise ISOs without triggering AMT?

Keep each year's spread inside your AMT room, or sell in the same year.

1. Exercise only up to your room. Your room resets each tax year. Exercising some shares in December 2026 and more in January 2027 uses two years of room.
2. Exercise while the spread is small. An early exercise with an 83(b) election, at a price equal to the share value, adds nothing to AMT income.
3. Sell in the same year. A sale before December 31 removes the AMT adjustment. You give up long-term gain, and the spread is taxed as wages, with no Social Security or Medicare tax.

AMT you pay because of ISOs is not lost. It becomes a credit on Form 8801, used in later years when your regular tax is higher than your tentative minimum tax. Selling the shares later can speed it up.

Do you have to pay the AMT during the year?

Not if last year's tax already sets your payments. The AMT counts toward the tax your withholding and estimated payments must cover. But the penalty test uses the smaller of two amounts: 90% of this year's tax, or 110% of last year's.

The 110% applies when your 2025 adjusted gross income was over $150,000. Otherwise it is 100%. If your 2026 withholding and estimated payments, made on time through the year, reach that amount, no underpayment penalty applies, however large the AMT. You then pay the AMT with your return by April 15, 2027. That can keep cash in your hands for months.

When does each step happen?

When	What happens
30 days after an early exercise	Last day to file an 83(b) election
December 31, 2026	Last day for an exercise or sale to count in 2026
Early 2027	Form 3921 arrives for each 2026 exercise
January 15, 2027	Fourth 2026 estimated payment due
April 15, 2027	File your 2026 return with Form 6251

What should you do now?

• List your vested ISOs, their exercise prices and the current share value.
• Estimate your 2026 regular tax and tentative minimum tax, and find your room before you exercise.
• Check your 2025 return, and set your withholding or estimated payments to the safe amount.
• Keep each Form 3921, and note the AMT basis of the shares you hold.

See our guides to ISO taxes and the alternative minimum tax, read when to exercise stock options, or meet our equity compensation CPAs.

Sources.

• 26 U.S.C. 56(b)(3), ISOs under the AMT
• 26 U.S.C. 55, AMT rates, exemption and phase-out
• 26 U.S.C. 53, credit for prior year minimum tax
• 26 U.S.C. 421, ISO exercise and early sales
• 26 U.S.C. 6654, estimated tax penalty
• Rev. Proc. 2025-32, 2026 brackets and AMT amounts
• IRS, Instructions for Form 6251 (2025)
• IRS, Instructions for Form 8801 (2025)
• IRS, Instructions for Forms 3921 and 3922
• IRS Publication 505 (2026), estimated tax