Alternative Minimum Tax (AMT) Simulators for Incentive Stock Options
Incentive Stock Options (ISOs) are a popular form of equity compensation—but they can come with a hidden cost: the Alternative Minimum Tax (AMT).
Many tech employees find themselves hit with unexpected AMT liabilities after exercising ISOs, even before selling the shares.
Thankfully, AMT simulators are helping employees model tax exposure and make informed decisions before it's too late.
📌 Table of Contents
- What Is the Alternative Minimum Tax?
- How ISOs Trigger AMT Risk
- Why You Need an AMT Simulator
- Top AMT Simulation Tools
- Tax Planning Tips with AMT Simulators
What Is the Alternative Minimum Tax?
The AMT is a parallel tax system designed to prevent high-income earners from avoiding taxes through deductions and credits.
For ISO holders, AMT can apply when the exercise price is lower than the fair market value (FMV) of the stock on the day of exercise—even if shares aren’t sold yet.
This can create a significant tax bill on paper gains that haven’t materialized into actual cash.
How ISOs Trigger AMT Risk
Let’s say you exercise 5,000 ISOs at $5/share when the FMV is $25/share.
The $100,000 “spread” is added to your AMTI (Alternative Minimum Taxable Income) for that year, potentially triggering AMT.
If the stock value drops or if you don’t sell in time, you may face tax without liquidity.
Why You Need an AMT Simulator
AMT simulators project your tax exposure across multiple exercise and holding scenarios.
They factor in variables like filing status, other income, ISO volumes, market value fluctuations, and timing of sale.
These tools empower users to optimize when and how much to exercise—balancing tax efficiency with financial risk.
Top AMT Simulation Tools
MyStockOptions offers robust AMT scenario planning for ISO holders.
Carta and Secfi provide ISO planning dashboards with AMT forecasting.
Financial planners may also use tax planning platforms like Holistiplan to simulate AMT under various equity compensation timelines.
Tax Planning Tips with AMT Simulators
1. Run simulations before year-end and before exercising large ISO blocks.
2. Watch for thresholds where AMT kicks in based on your marginal income and deductions.
3. Consider exercising incrementally across years to reduce AMT exposure.
4. Use disqualifying sales (early sales) to offset AMT in future years if needed.
5. Consult a CPA or financial advisor to review your AMT projections before finalizing equity moves.
Further Tools for Equity Tax Planning
If you're navigating ISOs or other forms of equity comp, here are more tools and insights worth exploring:
Dynamic Risk Engines for Equity ModelsEquity Trading Implications for Carbon Credits
AI Assistants for Tax-Smart Option Exercises
Ethical Scenario Simulators for Equity Strategy
Due Diligence Tools for Exit-Ready Employees
Keywords: AMT simulator, ISO tax planning, equity compensation tools, alternative minimum tax, financial planning SaaS
