How does AMT carryforward work when selling stocks with capital gains?

Thanks for the explanation, but I'm still a bit confused. Let's say I have $50,000 in AMT credits and this year I'll have $30,000 in capital gains taxes. Will I be able to use my AMT credits to cover all of those capital gains taxes? Or does it depend on my other income and deductions? Also, is there a specific form I need to fill out to claim these AMT credits properly?

Whether you can use your AMT credits to fully offset your capital gains taxes depends on your overall tax situation. The AMT credit can reduce your regular tax down to your tentative minimum tax, not necessarily to zero. If your tentative minimum tax is lower than your regular tax after including capital gains, you can use AMT credits to reduce your regular tax down to that AMT level. You'll need to complete Form 8801 "Credit for Prior Year Minimum Tax" to claim your AMT credit. This form helps calculate how much of your prior year AMT credit you can use in the current year. I'd recommend working with tax software or a professional who understands AMT, as the calculations can get complicated when significant capital gains are involved.

Did you find it actually explained the AMT calculations clearly? I've used other tax software and they just spit out numbers without helping me understand what's happening with my AMT credits.

I'm skeptical about these online tax tools. How does it handle the complexity of AMT with capital gains? I've heard horror stories about people getting this wrong and ending up owing thousands they didn't expect.

The tool actually breaks down each calculation step by step, showing how your AMT credits offset against regular tax vs tentative minimum tax. It explained that my credits could offset regular income tax (including tax on capital gains) but only down to my AMT floor for the current year. For AMT with capital gains specifically, it simulated different selling scenarios to show how much of my credits I could use in each case. It handles the complexity by running the calculations both ways (regular tax and AMT) and showing where the credits apply. This helped me avoid selling too many shares in one year where I couldn't use all my credits effectively.

Wait, how exactly does this work? The IRS phone lines are notoriously impossible to get through on. Are you saying this service somehow gets you to the front of the line?

Yeah right. No way this actually works. I've spent HOURS on hold with the IRS and eventually just gave up and paid a CPA $500 to figure out my AMT issues. If this actually worked, everyone would be using it.

It uses a system that continuously redials and navigates the IRS phone tree until it gets through to an agent. Once it connects, you get a call back immediately so you can talk to the agent. It's not cutting the line - it's just automating the tedious process of repeatedly calling and navigating the menus until you get through. The agents I spoke with were really helpful with my AMT credit questions. They walked me through form 8801 line by line and explained how my capital gains would interact with my AMT credits. Much better than trying to decipher the IRS publications on my own.

I used TurboTax last year for a similar situation. It does handle the AMT credit calculations and form 8801 automatically, but I found I had to be really careful about how I entered my ISO exercise information and stock sales. Make sure you have your original ISO exercise documentation handy with the correct fair market values and strike prices. Double-check the calculated AMT credit amount against your prior year return to make sure it carried forward correctly.

Thanks for the insight! Did you find any specific screens or steps in TurboTax that I should pay extra attention to? I have all my documentation, just want to make sure I don't miss anything important when entering the information.

Pay close attention to the section where you enter your stock sales. Make sure you correctly identify which shares were from ISO exercises and that the cost basis is entered correctly. TurboTax sometimes gets confused when you have multiple lots of the same stock acquired different ways. Also review the AMT screens carefully - TurboTax will ask if you paid AMT in previous years and will pull in your carryforward amount, but verify this against your previous return's Form 8801. I found the "tax tools" section useful for double-checking the AMT calculations. If your situation is complex, consider paying for TurboTax Live to get a CPA to review everything before filing.

That's really helpful to know. So if my AMT credit is larger than what I can use this year, I can just apply the remainder to future years? Is there any limitation on how many years I can carry it forward?

Exactly right - there's no expiration date on AMT credits. You can carry them forward indefinitely until they're used up completely. This is actually a strategic planning opportunity many people miss. If you calculate that you can only use a portion of your AMT credits against this year's capital gains, you might want to consider selling just enough shares to optimize your credit usage this year, then selling more next year. This approach can sometimes result in paying less total tax over time compared to selling everything at once. The key is running the numbers both ways (all at once vs. spread out) to see which results in the most efficient use of your AMT credits.

This is incredibly helpful context - thank you for sharing your real-world experience! The point about AMT potentially being triggered again by large capital gains is something I hadn't considered. When you say you found that splitting your sales 60/40 across two years was more effective, did you use any specific tools or calculators to model those scenarios? I'm trying to figure out the optimal timing for my own stock sales and want to make sure I'm not leaving money on the table by selling everything at once. Also, did you work with a tax professional to run these calculations, or were you able to figure it out using tax software?