ISOs › AMT Advanced

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.

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.

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

Puzzled by what to do with your W-2, Form 1099-B, or Forms 3921 and 3922? Don't quite know how and where to report sales of company stock on Form 8949 and Schedule D? Tax returns involving income from stock options or ESPPs can be confusing. The potential for mistakes is increased by new IRS reporting forms and rules for the 2019 tax season. This article explains errors to avoid when reporting stock compensation and stock sales on your tax return.

Learn about year-end planning for incentive stock options. This article includes ideas related to the alternative minimum tax.

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...

As long as you sell the shares on or before December 31, you will...

It would be a disqualifying disposition, but you still have an AMT preference item for your...

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...

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...

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

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...

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

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

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...

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...

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...

The wash sale rule disallows the loss on a sale of stock if the same stock...

Unlike with a stock sale, gifting ISO stock does not result in an AMT adjustment for the difference...

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

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...

One strategy for minimizing AMT is to spread out the exercise of ISOs over...