409A Stock Option Exercise & AMT Tax Calculator
Calculate startup stock option exercise cash requirements, 409A Fair Market Value paper spread, Alternative Minimum Tax (AMT liability), and IPO profits.
Calculated Results
Frequently Asked Questions
What is the ISO Alternative Minimum Tax (AMT) trap?
When you exercise Incentive Stock Options (ISOs) and hold the shares, you do not pay ordinary income tax immediately. However, the 'spread' between your strike price and the current 409A Fair Market Value (FMV) is treated as taxable income under the Alternative Minimum Tax (AMT at 26%–28%), creating a large cash tax bill on illiquid private shares.
What is an IRS Section 409A valuation?
A 409A valuation is an independent appraisal required by the IRS that establishes the Fair Market Value of a private company's common stock, setting the legal minimum strike price for employee stock options.
How does early exercising with an 83(b) election save taxes?
If a startup permits early exercise before vesting, filing an IRS Section 83(b) election within 30 days locks your FMV equal to your strike price ($0 spread), triggering $0 in AMT and starting the 1-year long-term capital gains clock immediately.
What happens to AMT paid if the company goes bankrupt?
If you pay AMT on an option exercise and the startup subsequently fails, you cannot simply claim a cash refund of the AMT paid; you only generate an AMT credit that can offset future regular tax liability over years.