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Incentive Stock Options (ISO): "Solve for Max" and AMT

ISO exercises aren't taxable under the standard calculation, but they are a preference item for Alternative Minimum Tax (AMT). Use the "ISO Solve for Max" feature to keep your clients out of AMT.

Unlike Non-qualified stock options, the exercise of an Incentive Stock Option is not a taxable event. But the bargain element (i.e., the difference between the market price and the strike price, multiplied by the number of shares) is a preference item for Alternative Minimum Tax (AMT), which gets reported on row 2i.


Accordingly, exercising ISOs may ultimately increase your client's tax bill because you've triggered AMT.

Within Holstiplan, you can determine the dollar amount of ISO bargain element that your client can realize before you've triggered AMT. Click the "gears" icon underneath the data field in Row 2i, and we'll calculate that amount for you!



If you've entered information in the "Available Credit for Prior Year AMT " field, we'll also show you the maximum ISO income you can realize before that credit begins to phase out.

You can see the visual of the Solve for Max (for both the credit phase-out or the triggering of AMT) in Range Calc. To see this, change the "Type of Income" drop-down box in Range Calc to "Incentive Stock Options (beta)" and you'll see something that looks like the following: