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ISOs - AMT Advanced

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7 ISO Strategies That Can Help Minimize Alternative Minimum Tax This is premium content

Exercising incentive stock options (ISOs) and holding the shares triggers the need for the alternative minimum tax (AMT) calculation. While you should consult a financial advisor, accountant, or tax lawyer about the AMT and your personal situation, this article details several strategies that experts often suggest.

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

If you must pay the alternative minimum tax (AMT), the best move may be to increase income and pay even more AMT! Find out why by reading this surprising analysis.

The ISO Tax Trap And The AMT Credit Myth: 5 Points To Know Before Exercise And At Year-End This is premium content

The tax reductions of the past few years have brought both good and bad news for holders of incentive stock options. While you may have lower capital gains rates when you hold the shares long enough after exercise, it is harder to avoid the risks of the alternative minimum tax (AMT) and to fully recover any AMT credit.
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Early-Exercise ISOs Complicated By Final IRS Regulations This is premium content

Featuring reverse vesting, early-exercise stock options are usually granted only by pre-IPO companies. The IRS regulations on ISOs increase risk in early-exercise options, making it crucial that you understand the tax treatment.

ISOs And Wash Sales: A Trap Within A Trap

A trap awaits those who, after selling shares from exercised ISOs to avoid AMT, want to buy back the stock.

12 Tax-Return Mistakes To Avoid With Stock Options And ESPPs This is premium content

Tax returns involving income from stock options or employee stock purchase plans (ESPPs) can be confusing. Recent changes in IRS reporting rules haven't helped. This article explains errors and nasty surprises to avoid.

ISOs: Tax-Return Tips And Traps This is premium content

Tax reporting with incentive stock options (ISOs) can be tricky. Learn what you need to report on your return at each stage of your ISO's life cycle.

Stockbrokers' Secrets: Year-End Planning For ISOs This is premium content

Learn about year-end planning for incentive stock options (ISOs). This article includes guidance on how to take advantage of the special ISO tax treatment and on the alternative minimum tax.


Is there a way to determine how many ISOs I can exercise and hold without triggering the AMT? This is premium content

One strategy for minimizing AMT is to spread out the exercise of ISOs over multiple years. Following the calculation steps outlined in this FAQ, you can determine what is sometimes called your AMT cushion or crossover point...

What ISO strategies can help minimize AMT liability? This is premium content

Experts suggest several strategies for you to consider when you exercise ISOs and are concerned about triggering the alternative minimum tax. For example, near year-end or at the beginning of the year, you can...

I have paid AMT, so do I get an adjustment when I sell the ISO shares to get all the taxes back? This is premium content

It's not that simple. AMT requires you to account separately for ISO shares not only at exercise but also when the shares are sold. If you paid AMT as a result of exercising ISOs, your sale of the ISO shares provides an opportunity for you to recover...
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I know that my ISO exercises will trigger the AMT for me this year or next. Are there planning strategies related to other tax payments and income? This is premium content

When you are intermittently subject to the AMT, tax advisors suggest different planning ideas on shifting income and deductions. You have much less flexibility in your planning when you project paying AMT for the next several tax years. A basic plan is to...

What should I do if I forgot to report the ISO exercise/hold on my tax return but now realize I may owe AMT? This is premium content

Generally, if you find a tax-return error and the statute of limitations period has not yet ended, you are required to file...

Are there any AMT strategies when I also have NQSOs? This is premium content

Yes. The AMT from your ISO exercises might be so high this year that you can also exercise NQSOs and essentially not pay any tax on the spread...

After I have paid the AMT on my ISO exercise-and-hold income, what are some mistakes that I must avoid on my tax return? This is premium content

Whether you still hold the ISO stock or you sold it in the past year, once you have paid AMT your tax returns get complex. The AMT is basically a prepayment of the tax on ISOs. You will get a credit for it in subsequent years, even when you have not sold the ISO stock. This means, for example, that you still need to...

My ISO exercise/hold will trigger the AMT. How much would the stock price have to drop for my AMT to exceed my ordinary income tax if I instead sell the shares? This is premium content

Assume that the ISO exercise/hold or other parts of the AMT calculation will trigger AMT. A rule of thumb is...

If I exercise ISOs and hold the stock (triggering AMT for the spread) or sell the stock in a disqualifying disposition, will I need to make estimated tax payments? This is premium content

You need to pay enough tax during the year through withholding or estimated tax payments to avoid penalties and interest. The tax that has to be paid includes any AMT attributable to the exercise of ISOs or any ordinary income from a disqualifying disposition. In these ISO situations, your employer does not...

What is the tax basis of my ISO stock that I use to calculate the sale gain for AMT purposes? This is premium content

When you trigger the alternative minimum tax (AMT) from an ISO exercise, you create dual-basis stock. This means that for the purposes of calculating your AMT gain and adjustment, the basis of the shares will be calculated differently for the regular tax and for AMT. For your regular tax, the basis is...

Are qualified dividends included in the AMT calculation? This is premium content

Qualified dividends do receive special tax treatment when they are part of your net capital gain. The amount of AMT is capped by the...

My company's stock price fell significantly after I acquired shares from ISOs, leaving me with a tax bill much larger than my gains. Can I reduce or eliminate the ordinary income or AMT that I owe?

To eliminate the tax, you would have had to sell the stock in the calendar year of your exercise. While some general approaches to this situation exist, only with ISO stock is there a possible escape hatch. Fortunately...

I can exercise my ISOs early and receive shares that still need to vest. Does my early exercise before vesting affect calculations for the AMT, disqualifying dispositions, or capital gains? This is premium content

Generally, stock options are exercisable when they vest. However, some pre-IPO companies grant ISOs that allow employees to exercise early into stock that is subject to a...

What is a wash sale? How does it apply to stock comp and affect tax-return reporting? This is premium content

If you sell company shares for a loss and buy more company shares within 30 calendar days before or after the loss transaction, the federal tax code will...

What would happen to my AMT credit at death, or to an AMT credit created by my estate? This is premium content

Some experts take the position that an AMT credit transfer, at least in a community property state...

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

The refundable AMT credit provision expired after 2012. It is not available. The history of the provision and its workings are detailed in this FAQ...
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