Stock option calculator
Exercising stock options can mean a tax bill before you have sold anything. Enter your options, strike price and pay to see the tax at exercise for ISOs or NSOs, the alternative minimum tax an ISO exercise can trigger, how many ISOs you can exercise with no AMT, and what selling or holding leaves you.
Quick answer: For a single filer earning $150,000, exercising 1,000 options with a $10 strike at a $50 share price (a $40,000 spread) adds about $9,600 of federal income tax plus $3,060 of Social Security and Medicare if they are NSOs. As ISOs held past year end, they cost $1,240 of federal AMT and no regular tax, and about 880 ISOs could be exercised in 2026 before any AMT is due.
By John Crane, MBA & the Editorial Team · Updated for the 2026 tax year. How we check our numbers
Cash to exercise and hold
$78,500
No regular income tax and no withholding at exercise. Holding the shares past December 31 adds the $160,000 spread to your alternative minimum tax income, which triggers $38,500 of AMT, due when you file.
| Strike price paid | $40,000 | 51.0% |
|---|---|---|
| Federal AMT | $33,948 | 43.2% |
| California AMT | $4,552 | 5.8% |
- Spread (AMT adjustment)
- $160,000
- Federal AMT
- $33,948
- California AMT
- $4,552
- AMT credit for later years
- $33,948
- AMT income
- $360,000
- AMT exemption left
- $90,100
Why ISOs can trigger AMT
The alternative minimum tax is a second calculation of your federal tax with fewer breaks: a flat exemption, then 26% and 28% rates. You pay whichever is higher. The ISO spread is ignored for regular tax but counted for the AMT, so a large exercise can push the AMT above your regular tax. California runs its own 7% AMT the same way.
AMT paid because of ISOs becomes a credit (Form 8801) you can use in later years when your regular tax is above your AMT, so it is mostly a prepayment. Here $33,948 carries forward. Selling the shares in the same calendar year as the exercise removes the AMT adjustment, but makes the spread ordinary income. Figures use 2026 rules, wages only and the standard deduction.
How this is calculated
NSOs
Nonqualified stock options are taxed when you exercise: the spread, the market price minus your strike price times the shares, is wages on your W-2. Employers withhold on it as supplemental pay: usually a flat 22% federal (37% on supplemental pay above $1 million in a year), Social Security up to the yearly wage base, Medicare (plus 0.9% above $200,000) and your state's rate for bonus pay. The tax actually owed comes from your full 2026 federal and state returns, so the difference is due at filing when your top bracket is above 22%. The market price at exercise becomes your cost basis.
ISOs and AMT
Incentive stock options have no regular income tax and no withholding at exercise. If you hold the shares past December 31, the spread counts for the alternative minimum tax, a parallel calculation with an exemption of $90,100 single or $140,200 married filing jointly in 2026, phasing out by 50 cents per dollar above $500,000 or $1,000,000 of AMT income, and rates of 26% and 28%. You pay the AMT when it is higher than your regular tax, and AMT from ISOs becomes a credit against regular tax in later years. California has its own 7% AMT, computed the same way. Only $100,000 of ISOs (at grant-date value) can first become exercisable in a year; the rest are NSOs.
Selling
An ISO sale qualifies when it is more than 2 years after the grant and more than 1 year after exercise: the whole gain over the strike is long-term capital gain. An earlier, disqualifying sale makes the spread at exercise ordinary income (capped at the actual gain), and a sale in the same year as exercise removes the AMT adjustment. For NSO shares only the change since exercise is taxed, long-term after a year. Not modeled: early exercise and 83(b) elections, multi-year AMT credit limits (the credit is assumed to come back in full), other states' AMTs, and deductions beyond the standard deduction.
Sources
- IRS Publication 525, Taxable and Nontaxable Income (stock options, ESPP and RSUs)
- IRS Form 3921, Exercise of an Incentive Stock Option
- IRS Form 6251, Alternative Minimum Tax
- California Franchise Tax Board forms (Schedule P, alternative minimum tax)
- IRS Revenue Procedure 2025-32: 2026 tax brackets, standard deduction and other inflation adjustments
Related guides
- ISO vs NSO stock options: taxes and AMTHow ISOs and NSOs are taxed at exercise and sale, when ISOs trigger the alternative minimum tax, and how many you can exercise before it applies.
Questions
Do ISOs trigger AMT?
They can. Exercising ISOs and holding the shares past year end adds the spread to your alternative minimum tax income, though not to your regular taxable income. For example, a single filer earning $150,000 who exercises 1,000 ISOs with a $10 strike at a $50 share price (a $40,000 spread) owes $1,240 of federal AMT; at 4,000 options (a $160,000 spread) it is $32,440. That AMT becomes a credit you can use in later years.
How many ISOs can I exercise without paying AMT?
It depends on your income and the spread per share, because the AMT only applies once it exceeds your regular tax. A single filer earning $150,000 with a $40 spread per share ($10 strike, $50 price) can exercise and hold about 880 ISOs in 2026, a $35,200 spread, before owing any federal AMT. The AMT-free shares tab works this out for your numbers, including California's AMT.
ISO vs NSO: what is the difference?
NSOs are taxed as pay when you exercise; ISOs are not taxed at exercise for regular tax but can trigger AMT, and get long-term capital gains treatment on the whole gain if you hold them long enough. Exercising 1,000 options with a $40 spread as an NSO adds about $9,600 of federal income tax plus $3,060 of Social Security and Medicare for a single filer earning $150,000; as ISOs held past year end, $1,240 of AMT and no payroll tax.
When should I exercise stock options?
There is no single answer. Exercising and selling at once needs no cash and removes the stock risk, but the spread is taxed at ordinary rates. Exercising and holding can turn the gain into long-term capital gain (for ISOs, all of it from the strike), but you pay the strike and any tax or AMT now and carry the risk that the shares fall. Exercising ISOs early in the year, or in amounts that stay under the AMT, keeps options open. The Strategies tab compares the two for your numbers.
What is a disqualifying disposition?
Selling ISO shares within 2 years of the grant or 1 year of exercise. The spread at exercise becomes ordinary income (not wages, so no Social Security or Medicare), capped at your actual gain, and anything above it is capital gain. Selling 1,000 ISO shares at $60 three months after exercising at $50 with a $10 strike makes $40,000 ordinary income and $10,000 short-term gain, about $12,000 of federal tax at $150,000 of salary.