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ISOs: AMT


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Stock Option Fundamentals (Part 5): Incentive Stock Option Taxation & Alternative Minimum Tax This is premium content

Marilyn Renninger
Learn how and when income from ISOs is subject to taxes, including the alternative minimum tax. You must consider taxes at both exercise and sale to put together an optimal strategy.

Dr. Strange Tax, Or: How I Learned To Stop Worrying And Love The AMT This is premium content

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. What I did not reckon on, however, was the alternative minimum tax. Here is my story.

IRS Form 3921 For Incentive Stock Options: What You Need To Know, And How It Can Help You Understand ISO Taxation This is premium content

Bruce Brumberg
Incentive stock option (ISO) exercises made during a calendar year are reported to you and the IRS on Form 3921 early in the following year. This article explains what you need to know about the information on the form, and how the form can help you better understand the complexities of ISO taxation.

The Alternative Minimum Tax Sweet Spot: Planning Opportunities This is premium content

Tom Davison and William Whitaker
"My income is around half a million dollars, and I'm paying the alternative minimum tax. It's annoying, and I feel trapped. Now what?" Surprisingly, the best move may be to increase income, and pay even more alternative minimum tax! Find out why by reading this intriguing article.

IRS Instructions For Form 6251: Alternative Minimum Tax

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.

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What is the alternative minimum tax?

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...

What is the latest news from Congress about legislation relating to the alternative minimum tax?

The American Taxpayer Relief Act has three provisions on the alternative minimum tax (AMT) that are important for high-income taxpayers, particularly those who exercise incentive stock options...

Is it easy to calculate AMT liability?

The AMT rules and forms baffle even tax professionals. You can better understand the process by...

In general, how does the alternative minimum tax (AMT) calculation work?

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...

UPDATES! Are there guidelines for calculating AMT trigger points? For example, if my spouse and I earn $100,000, will we trigger the AMT when I exercise ISOs? This is premium content

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, particularly if they exercise and hold ISOs with a big spread. The figures in the table below estimate the tipping point...

Do I eliminate AMT by selling in the year of exercise or within a year of exercise? This is premium content

You can eliminate AMT for your ISO exercise by...

How do incentive stock options affect my liability for paying alternative minimum tax?

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...

Do I get a tax credit if I paid AMT when I exercised an ISO? How does it work? This is premium content

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...

I have a large unused AMT credit. Is there now a refundable AMT credit to help me use it faster? This is premium content

For AMT credits more than three years old, the refundable AMT credit was, for a limited time only, a potential way to speed the recovery of taxes paid when ISO exercise triggered the AMT. However, this special tax treatment was not extended beyond the 2012 tax year...

I held ISO stock on which I paid AMT in a prior year. Do I still need to determine my AMT even if I do not sell the stock?

Once you've paid AMT, you should always calculate it in future years to recover the taxes you essentially prepaid...

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