Equity Compensation Tax ISO • NSO • RSU • AMT • Form 8801

Stock Options & AMT Tax Calculator

Model exercise spreads, Alternative Minimum Tax (AMT) on ISOs, Section 83(b) election strategies, and future Form 8801 AMT credits.

1. Equity Grant Structure

Option / Equity Type:

Number of Shares:

Strike / Grant Price ($):

FMV at Exercise ($):

Eventual Exit Price ($):

2. Income & Filing Status

Filing Status:

Regular W-2 Salary ($):

State Tax Rate (%):

Disposition Type:

Filed IRC Section 83(b) Election at Grant

Filing an 83(b) election locks in $0 taxable spread at grant, transforming 100% of future upside into low-rate Long-Term Capital Gains.

Equity Tax & AMT Liability

Exercise & Exit Tax Analysis

AMT Due at Exercise: $42,650

Exercise Cost

$50,000

Cash to Exercise

Paper Spread

$250,000

FMV - Strike

Tax Due in Exercise Yr

$42,650

AMT Form 6251

Net Profit at Exit

$472,350

After All Taxes

Gross Value at Liquidity / Exit: $650,000

Minimum Tax Credit Generated (Form 8801 MTC): $42,650 (Future Tax Shield)

Capital Gains Tax Rate at Exit: 20.0% Federal + 3.8% NIIT

Total Effective Tax Rate on Gain: 21.3%

Exit Proceeds Breakdown

Net Take-Home vs Taxes

Equity Compensation Tax Treatment Comparison

Equity Type	Tax at Exercise / Vesting	Tax at Sale / Exit	Form 8801 Credit?
Incentive Stock Options (ISO)	No regular tax; AMT on spread	Long-Term Capital Gains	Yes (MTC Credit)
Non-Qualified Options (NSO)	Ordinary Income (W-2)	Capital Gains on growth post-exercise	No
Restricted Stock Units (RSU)	Ordinary Income (W-2 at Vest)	Capital Gains on growth post-vest	No

✨ AI Stock Option & AMT Tax Strategist 100% Private AI

Click "Run AI Equity Audit" to generate step-by-step exercise timing strategies, disqualifying disposition comparisons, and AMT credit recovery models. Your data is 100% private to you—zero server access.

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Silicon Valley Equity & Tax Case Study

The $78,000 AMT Trap: How an Early Tech Engineer Handled the Paper Wealth Tax Shock

A real-world quantitative breakdown of Incentive Stock Option (ISO) exercise spreads, Form 6251 Alternative Minimum Tax, and Section 83(b) elections.

The Dangerous Illusion of Illiquid Paper Wealth

When employees exercise Incentive Stock Options (ISOs) at a private startup, the difference between the 409A Fair Market Value and their strike price is treated as income under the Alternative Minimum Tax (AMT) code. If an employee exercises 20,000 shares with a $20 spread, they trigger $400,000 in paper income—generating tens of thousands in real cash tax liability on illiquid shares that cannot yet be sold on the public market.

The Scenario: Sarah's Series B Option Grant

Sarah joined an AI unicorn with 10,000 ISOs at a $5.00 strike price. By Year 3, the company's valuation increased to $30.00/share. She explores three strategic paths:

Path 1: Exercise & Hold (No 83b)

Exercise Cost: $50,000

AMT Tax Triggered: $42,650

Total Out-of-Pocket: $92,650

Path 2: Early Exercise + 83(b)

Exercised at Grant ($5.00 FMV)

AMT Spread: $0.00

Immediate 83(b) Saved $42.6k!

Path 3: IPO Exit at $65/share

Gross Proceeds: $650,000

Recovers $42.6k via Form 8801

Net Profit: $472,350

Federal AMT Rate Brackets (2026 Statutory Rates)

Filing Status	2026 AMT Exemption	Exemption Phase-Out Threshold	AMT Marginal Rates
Single / Head of Household	$88,100	$609,350	26% up to $232,600; 28% above
Married Filing Jointly	$137,000	$1,218,700	26% up to $232,600; 28% above

The Golden 30-Day Section 83(b) Deadline

If your startup allows early exercise of unvested options, filing an IRC Section 83(b) election within 30 days of purchase is the single most powerful equity tax strategy in existence. It fixes your tax basis at pennies per share, completely eliminates future AMT spreads, and starts your 1-year Long-Term Capital Gains clock immediately.

Frequently Asked Questions (Stock Options & AMT)

Why do Incentive Stock Options (ISOs) trigger Alternative Minimum Tax (AMT)?

When you exercise Incentive Stock Options (ISOs) and hold the shares beyond the calendar year, the 'spread' (difference between the Fair Market Value at exercise and your strike price) is treated as a tax preference item for AMT purposes under IRC § 56(b)(3), even if you have not sold the shares or received any actual cash.

What is an IRC Section 83(b) Election?

A Section 83(b) election allows an employee or founder receiving unvested equity or early-exercised options to pay ordinary income tax on the fair market value at grant rather than paying tax on future appreciated value when the shares vest. The election must be filed with the IRS within 30 days of the grant/exercise date.

Can you recover AMT paid on ISO exercises in future years?

Yes. When you pay AMT resulting from an ISO exercise spread, you generate a Minimum Tax Credit (MTC) reported on IRS Form 8801. In future tax years where your regular tax exceeds your tentative minimum tax, you can use this credit to reduce your federal tax bill dollar-for-dollar.