ISO Tax Calculator
Calculate tax impact for Incentive Stock Options
Disclaimer
This calculator is for educational and projection purposes only. Calculations use general assumptions based on 2026 federal tax rates and may not reflect your exact tax situation. Results should be verified with a qualified tax professional or CPA before making any financial decisions.
Input Parameters
Enter your ISO exercise details
Tax Calculation Results
Based on 2026 federal tax rates
Bargain Element (Spread)
Total Tax on Exercise
• AMT Exemption: $90,100
• Taxable AMTI: $99,900
How ISO Taxes Work in 2026
Incentive Stock Options (ISOs) receive preferential tax treatment compared to Non-Qualified Stock Options. When you exercise ISOs, no regular income tax is owed on the bargain element (the difference between FMV and your strike price). However, the spread is added to your Alternative Minimum Taxable Income (AMTI).
For 2026, the AMT exemption is $90,100 for single filers and $140,200 for married filing jointly. The AMT rate is 26% on the first $244,500 of AMTI above the exemption, and 28% on amounts above that threshold. The exemption phases out at 50 cents per dollar for AMTI above $500,000 (single) or $1,000,000 (married).
If you hold ISO shares for more than 2 years from the grant date and 1 year from the exercise date, any gain on sale is taxed at long-term capital gains rates (0%, 15%, or 20% depending on income). Selling before these holding periods triggers a disqualifying disposition, where the spread at exercise is taxed as ordinary income.
Frequently Asked Questions
What is the AMT exemption for 2026?
For 2026, the AMT exemption is $90,100 for single filers and $140,200 for married filing jointly. The exemption begins to phase out at $500,000 (single) and $1,000,000 (married) of AMTI, at a rate of 50 cents per dollar. Source: IRS Revenue Procedure 2025-32.
Do I owe regular income tax when I exercise ISOs?
No. Unlike NSOs, exercising ISOs does not trigger regular income tax. However, the bargain element (FMV minus strike price) is added to your AMTI, which may trigger AMT. The AMT paid creates a credit that can offset future regular tax liability.
What is a qualifying vs. disqualifying disposition?
A qualifying disposition means you held the shares for at least 2 years from the grant date and 1 year from the exercise date. Gains are taxed at long-term capital gains rates. A disqualifying disposition (selling before these periods) treats the spread at exercise as ordinary income, losing the ISO tax advantage.
What are the 2026 long-term capital gains rates?
For 2026, the long-term capital gains rates are 0% (up to $49,450 single / $98,900 married), 15% (up to $545,500 single / $613,700 married), and 20% above those thresholds. The 3.8% Net Investment Income Tax (NIIT) may also apply for income above $200,000 (single) or $250,000 (married).
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