What is Alternative Minimum Taxable Income (AMTI)?

AMTI starts with your regular taxable income, then adds back all the AMT "preference items" and "adjustments" that were allowed for regular tax but are not allowed for AMT. The major addbacks are: (1) SALT deductions, (2) ISO exercise spread, (3) private activity bond interest, (4) some depreciation differences. The result is your AMTI, from which you subtract the AMT exemption to get the AMT base.

What are the 2025 AMT exemptions?

For 2025: $88,100 for single filers and $137,000 for married filing jointly. These are reduced (phased out) by $0.25 for every $1 of AMTI above $626,350 (single) or $1,252,700 (MFJ). At very high incomes, the exemption is fully phased out. The exemption amounts are indexed for inflation annually.

How does an ISO exercise trigger AMT?

When you exercise Incentive Stock Options but don't sell the shares in the same year, you pay no regular income tax. But for AMT, the spread (FMV at exercise − exercise price) is added to your AMTI. If you exercise a large number of ISOs when the stock has high FMV, the AMT can be enormous — even if you hold the stock and it later drops in value. This is the "ISO AMT trap" that caught many tech employees during the dot-com bust. The AMT paid generates an "AMT credit" that you can use against regular tax in future years.

Can I recover AMT I paid in prior years?

Yes, through the AMT credit (Form 8801). AMT paid due to "timing differences" (like ISO exercises) is recoverable in future years when your regular tax exceeds your tentative minimum tax. AMT from "exclusion items" (like SALT) is generally not recoverable. The recoverable AMT credit has no expiration and carries forward indefinitely.

What is the ISO "disqualifying disposition" to avoid AMT?

If you sell ISO shares in the same year you exercise them (a "disqualifying disposition"), the ISO spread is treated as ordinary income and there is no AMT preference item. You pay ordinary income tax but avoid the AMT issue. For startups with 409A valuations near strike prices, or when shares are immediately liquid (post-IPO), a same-year sale eliminates the AMT risk.

Tax

Alternative Minimum Tax (AMT) Calculator — ISO Exposure & SALT Addback

Calculate your Alternative Minimum Tax exposure. Model ISO exercise AMT, SALT addback impact, and exemption phaseout. Know before you file Form 6251.

By The FinCalc TeamUpdated May 31, 2026

The Alternative Minimum Tax (AMT) is a parallel federal income tax system designed to ensure high earners pay a minimum amount of federal tax regardless of deductions. You compute your tax under both the regular system and the AMT system, then pay whichever is higher. AMT strikes most often when you have large itemized deductions (especially SALT), exercise Incentive Stock Options (ISOs), or have significant preference income. The 2017 Tax Cuts and Jobs Act raised the AMT exemption and phaseout thresholds dramatically, reducing the number of taxpayers affected — but high-ISO-exercise years and certain high-deduction situations still trigger significant AMT exposure.

How AMT Is Calculated

AMT runs as a parallel tax system alongside your regular income tax:

Step 1 — Compute AMTI:

AMTI = Regular taxable income
     + SALT deductions
     + ISO spread (exercised but not sold)
     + Private activity bond interest
     + Other preferences/adjustments

Step 2 — Subtract AMT exemption (phased out at high incomes):

AMT base = AMTI − AMT exemption (with phaseout)

Step 3 — Apply AMT rates:

Tentative Minimum Tax = 26% × first $239,100 of AMT base
                      + 28% × AMT base above $239,100

Step 4 — Pay the higher of regular tax or TMT:

AMT owed = max(0, Tentative Minimum Tax − Regular Federal Tax)

Who gets hit most:

ISO exercisers with large unrealized spreads in the exercise year
Itemizers with large SALT deductions (especially pre-TCJA, still relevant in high-tax states)
High-income households just below the full exemption phaseout
Private activity bond holders with otherwise low regular tax

When to Use This Calculator

Use this calculator when:

Planning an ISO exercise — Before exercising incentive stock options, calculate the AMT exposure at current FMV. Knowing the tax cost helps you decide how many options to exercise in a given year.
Itemizing deductions in a high-tax state — California, New York, New Jersey, or Oregon residents with large SALT deductions should check whether AMT applies, especially if SALT was a major itemized deduction.
Year-end tax planning — If you might be near AMT territory, this calculator shows how much additional income or deductions would tip you in or out.
Recovering prior AMT credit — If you paid AMT in a prior year due to ISO exercises, check whether you can now use the AMT credit against this year's regular tax.
Understanding the ISO "hold or sell" decision — Model the AMT cost of holding ISOs vs. doing a same-year disqualifying disposition to treat the spread as ordinary income and avoid AMT entirely.

Understanding the Inputs

Filing Status: Determines your AMT exemption amount and phaseout threshold. 2025 exemptions: $88,100 (single/MFS) and $137,000 (MFJ). The phaseout starts at $626,350 single and $1,252,700 MFJ, reducing the exemption by $0.25 for each dollar of AMTI above the threshold.
Regular Federal Taxable Income: Your federal taxable income from Form 1040 line 15 — after standard or itemized deductions but before AMT. This is the starting point for both regular tax and AMT. AMT addbacks are stacked on top of this amount.
Regular Federal Income Tax: Your federal income tax from Form 1040 line 16 (the regular tax before credits, AMT, and other taxes). AMT owed = max(0, Tentative Minimum Tax − Regular Tax). You only owe AMT if it exceeds your regular tax.
State/Local Taxes Deducted (SALT): The amount of state income taxes, local taxes, and/or property taxes you deducted as itemized deductions. SALT deductions are completely disallowed for AMT purposes — the full amount is added back to compute Alternative Minimum Taxable Income (AMTI). The 2025 OBBBA raised the regular-tax SALT cap to $40,000, but for AMT, every dollar of SALT deducted is added back.
ISO Spread (Incentive Stock Options): If you exercised ISOs and did NOT sell the shares in the same year, the spread (FMV at exercise minus exercise price, times number of shares) is an AMT preference item. It is not income for regular tax in the exercise year, but it IS included in AMTI. Large ISO exercises are the most common cause of unexpected AMT for startup employees and executives.
Private Activity Bond Interest: Interest on most "private activity" municipal bonds is tax-exempt for regular tax but is a preference item for AMT. General obligation bonds (issued for public purposes) are not preference items. Check the bond prospectus or your 1099-INT box 9 to identify private activity bond interest.

Frequently Asked Questions

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The FinCalc Team

Personal Finance Experts

The FinCalc team is a group of personal finance writers, analysts, and engineers dedicated to building accurate, transparent financial calculators. Every formula is verified against industry standards and explained in plain language.

Last reviewed and updated: May 31, 2026