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Tax simulator
ISO exercise tax-impact simulator
Exercising incentive stock options has tax consequences that are hard to see until you run the math. Enter your grant details and a holding-period scenario, and this shows the Alternative Minimum Tax an exercise can generate even though the regular tax system charges nothing on the spread, plus how the eventual sale is taxed depending on how long you hold. It lays out the cost and timing tradeoffs as actual numbers across the scenarios.
Background reading: Equity compensation
Additional AMT cost of exercising now
$117,348
The regular system charges nothing on the spread; this is the AMT the bargain element triggers.
How the bargain element lands
Bargain element ((FMV - strike) x shares)$380,000
In AMT for the exercise yearYes
Incremental AMT owed at exercise$117,348
Gain over strike (if sold at this price)$380,000
If you later sell: qualifying disposition
Ordinary income$0
Long-term capital gain$380,000
Estimated tax on the gain$90,440
If you sell same year: disqualifying disposition
Ordinary income$380,000
Capital gain$0
Estimated tax on the gain$133,466
Holding-period clocks
From grant2 years
From exercise1 years
Where this goes next
This shows the tax under each timing path; it does not tell you how many shares to exercise or when. That decision is a conversation with a CFP.
Assumptions and simplifications
- AMT at exercise reuses the shared AMT estimate (AMTI is income plus the bargain element); it is a structural approximation flagged for licensed logic and the pre-launch review.
- A qualifying disposition assumes both ISO holding clocks are met (exercise in a prior year, with AMT already assessed then); the later AMT credit is out of scope.
- A same-year disqualifying disposition removes the AMT preference and taxes the whole gain as ordinary income; NIIT on any short-term portion is not modeled here.
- Tax on the gain is estimated at the marginal rates the gain stacks into; it excludes other deductions and credits.