Marilyn Renninger
You're ready to delve deeper into how and when different taxes apply to ISOs, including the AMT. You need to consider taxes at exercise and at sale to put together a strategy that maximizes the value of your options.
Several years ago I faced a new situation. I'd been working for a solid Fortune 500 company for a number of years and had a substantial number of stock options, mostly incentive stock options (ISOs). They were quite valuable.
Tom Davison
Even under President Barack Obama, the Bush administration's 2003 tax cuts and later extensions will continue to affect tax strategies for NQSOs, ISOs, and restricted stock. Unless these tax laws change soon, many of them will persist through 2010.
Internal Revenue Service
The line-by-line instructions explain how the AMT is calculated and what the IRS expects on the form, including the adjustment for ISO exercises.
Marie Leone
CFO
Various way to avoid getting caught by AMT, including some ideas for ISOs.
Sue Stevens
Morningstar.com
Almost nobody likes preparing income tax returns, but you'll like it even less if you make mistakes and pay more tax than you need to. Most of the suggestions remain useful every tax year. (Free registration is required.)
Bill Bischoff
SmartMoney
The AMT and other tax rules affecting ISOs.
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Running parallel to the regular tax system, the alternative minimum tax (AMT) was designed to require extremely wealthy people to pay their fair share of taxes when credits and deductions could otherwise reduce or eliminate their tax liabilities. However, the reach of the AMT has expanded over time to hit middle-income people it was never intended to tax...
To keep middle-income people from being unfairly hit by the alternative minimum tax, Congress has enacted temporary relief during each of the past few years. These include legislative "patches" to extend and increase the income exemption amounts that apply to the AMT. The AMT income exemption amounts for 2009 are...
The AMT rules and forms baffle even tax professionals. You can better understand the process by...
The AMT system is complicated. Broadly, it starts by taking your adjusted gross income, subtracts your itemized deductions, makes certain negative and positive adjustments, and includes certain tax items called tax "preferences." The resulting amount...
ISOs affect your AMT liability in two ways. Each way must be considered in your planning both at ISO exercise and then again at sale. First...
Yes. People who live in high-tax states and itemize tax deductions or who have significant personal exemptions can easily owe more in AMT than in regular taxes. See the figures in the table below, which estimate the tipping point for the positive adjustments (e.g., ISO exercises) that, when added back to your taxable income, can trigger the AMT...
You now have two alternatives for using up your AMT credit. If you owe AMT for the tax year in which you exercised an ISO, all or a part of the amount by which your AMT liability exceeds your regular tax liability can generate a tax credit that...
This depends on how long ago you exercised the ISOs that triggered the alternative minimum tax. The 2008 version of the new AMT credit law, discussed below, is most favorable for you. First, however, some background on the law may be helpful...
You eliminate AMT for your ISO exercise by...
Once you've paid AMT, you should always calculate it in future years to recover the taxes you essentially prepaid...
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