How exactly are Alternative Minimum Tax (AMT) calculations done? I'm lost!

The Alternative Minimum Tax (AMT) is basically a parallel tax system designed to ensure that higher-income individuals pay at least a minimum amount of tax, regardless of deductions or credits they might claim. You're right that most resources don't give you the full picture, so let me break it down. Yes, you essentially need to calculate your taxes twice - once under regular rules and once under AMT rules. You'll pay whichever amount is higher. The stock options you exercised are likely triggering AMT because the bargain element (difference between exercise price and fair market value) is considered income for AMT purposes but not for regular tax purposes until you sell the shares. For AMT calculations, you start with your regular taxable income, then add back certain "preference items" (like your stock options) and disallow certain deductions (like state and local taxes). You then subtract the AMT exemption amount ($130,700 for married filing jointly in 2025), and apply the AMT rates (26% on the first $206,500 and 28% on anything above that for 2025). Your mortgage interest is mostly still deductible under AMT. The exemption phases out if your AMT income exceeds certain thresholds, which could be your case with the stock options added in.

After struggling with AMT calculations for my ISOs last year, I discovered taxr.ai (https://taxr.ai) and it completely changed how I handle these complex tax situations. Their system analyzed my stock options and tax documents, then showed me exactly how the AMT would impact me - way better than generic calculators. What I found especially helpful was that it ran multiple scenarios showing how exercising different amounts of options would impact my AMT liability. It also created a personalized timeline for when to exercise throughout the year to minimize the tax hit. I was able to save almost $12K by spreading out my exercises instead of doing them all at once.

I was really skeptical about using any special tax tool for my AMT situation, but after that nightmare last year where I unexpectedly owed an additional $22K, I decided to try taxr.ai based on recommendations here. Honestly, I'm glad I did. The AMT projection it created was eye-opening. It showed me exactly how much each batch of options I was planning to exercise would push me into AMT territory. I was able to adjust my exercise schedule based on their recommendations, and ended up with a much lower tax bill than I would have otherwise. What I found most valuable was the year-by-year planning tool that showed how my AMT credits would be used in future years. I never understood that part before - that you can potentially recover some of your AMT payments in future years when your regular tax exceeds your AMT. For anyone dealing with stock options and AMT, having this kind of specialized analysis really makes a difference compared to just using a general tax calculator.

If you're dealing with AMT and need clarification directly from the IRS, good luck getting through to them right now. I spent DAYS trying to talk to someone about my AMT situation last year. After countless busy signals and disconnections, I found Claimyr (https://claimyr.com) - they got me connected to an IRS rep in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I had specific questions about how my incentive stock options would be treated under AMT rules and needed definitive answers from the source. The IRS agent I spoke with walked me through exactly how to calculate the adjustment and what forms I needed. She even sent me to a specialized department that handles AMT questions specifically. Getting actual clarification from the IRS saved me from making a costly mistake on my AMT calculation. Plus, having the conversation documented gave me audit protection if questions ever come up about how I handled it.

Well I'm eating my words about Claimyr. After posting my skeptical comment, I decided to try it myself because I was desperate to get clarification on how the AMT credit carryforward works for my situation. I have AMT credits from 2023 that I hadn't been able to fully use. The service actually connected me to an IRS tax law specialist in about 25 minutes. I explained my situation with the AMT credit carryforward from exercising ISOs in previous years, and she explained exactly how to claim the remaining credit on my 2025 return. She even emailed me the specific instructions for Form 8801. Honestly, I was prepared to write a scathing follow-up if it didn't work, but I have to admit it delivered exactly what it promised. Getting clear guidance on AMT credits directly from the IRS was actually worth it, especially since I'd been getting conflicting advice from various online sources.

One aspect of AMT that often gets overlooked is the planning opportunities AFTER you've already paid AMT. When you pay AMT because of timing differences (like ISO exercises), you generate an AMT credit that can be carried forward to future years. I paid nearly $37,000 in AMT three years ago when I exercised options, but I've been able to recover about $23,000 of that through AMT credit carryforwards on subsequent returns. You need to file Form 8801 (Credit for Prior Year Minimum Tax) each year to claim these credits. The key is understanding that you can only use the credit in years when your regular tax exceeds your AMT. So sometimes it makes sense to accelerate income or defer deductions in future years to maximize how much of the credit you can use.

Has anyone used TurboTax for AMT calculations with stock options? I heard it doesn't handle the AMT credit carryforwards correctly and I'm worried I'll mess something up. Would I be better off with H&R Block or going to a CPA?

I went through a similar situation last year with ISOs and AMT, and I wish I had understood the mechanics better beforehand. Let me try to fill in some gaps that might help you. The key thing to understand about your $143,000 ISO exercise is that the "bargain element" (difference between what you paid and fair market value) gets added back as an AMT preference item. So if you exercised options with a strike price of $10 and the shares were worth $20, that $10 difference per share becomes AMT income even though it's not regular taxable income until you sell. With your $187,000 salary plus the ISO adjustment, you're definitely going to be in AMT territory. The good news is that your mortgage interest is still mostly deductible under AMT (unlike state taxes), and your charitable deductions will help both calculations. One thing that helped me was using the AMT Assistant worksheet from IRS Publication 909 to do a rough calculation before year-end. It's not perfect, but it gave me a ballpark figure. The key is understanding that you'll likely owe AMT this year, but you'll generate AMT credits that can be recovered in future years when your regular tax exceeds AMT. For planning purposes, if you still have unvested options, consider the timing of future exercises more carefully. Spreading them across multiple years can help minimize the AMT impact compared to doing large exercises all at once.