HenryCalc
ISO exercise tax calculator
Estimate the all-in cash to exercise ISOs: exercise cost plus the AMT from the bargain element.
The real cost of exercising ISOs
Exercising incentive stock options has two cash costs that surprise people. The first is the exercise cost - your strike price times the number of shares, which you pay to actually buy the stock. The second, easy to forget, is the alternative minimum tax that the bargain element can trigger when you exercise and hold past December 31.
What this calculator estimates
Enter your strike price, the current fair market value, the share count, your other income and filing status. The tool shows the exercise cost, the bargain element, the estimated AMT, and the total cash you need to exercise and hold.
Managing the bill
Because AMT scales with the bargain element, the number of shares you exercise is the main lever. Many people exercise up to their AMT crossover point each year and spread the rest across future years, or do a same-day sale to convert the event to ordinary income and skip the AMT entirely. Model the trade-off before committing cash, and confirm the final number with a CPA.
Frequently asked questions
- How much cash do I need to exercise ISOs?
- Two things - the exercise cost itself (your strike price times the number of shares) and any alternative minimum tax triggered by the bargain element if you exercise and hold past year-end. This calculator adds both into a single cash figure.
- Can I exercise and sell same day to avoid AMT?
- Yes. A same-day sale is a disqualifying disposition that taxes the gain as ordinary income instead of creating an AMT preference item. You lose the favorable ISO treatment but avoid a large AMT bill on shares you have not sold.
- What is the bargain element?
- It is the fair market value at exercise minus your strike price, times the number of shares. It does not appear on your regular tax return when you hold, but it is added to your alternative minimum tax income.
Last reviewed January 2026. This calculator provides general educational estimates based on the inputs you enter and simplified assumptions. It is not financial, tax, legal or investment advice, and figures may differ from your actual liability. Verify with a licensed CPA or financial advisor before acting.