Managing Incentive Stock Option (ISO) Taxation - AMT Adjustment Question for Different ISOs

The AMT credit from prior years can only be used to offset regular tax above your AMT in current years. For the cost basis question, you need to understand how the AMT adjustment works specifically. When you exercise ISOs, you pay AMT on the bargain element (difference between fair market value and exercise price). This creates what's called an "AMT adjustment" to your basis in those specific shares. When you later sell those specific shares, you get to use that adjusted basis for AMT purposes. The key point here is that the AMT adjustment only applies to the specific ISOs that triggered the AMT. You can't transfer the AMT basis adjustment to other ISO shares. The AMT credit, however, is separate - it's not share-specific but rather a credit you can use in future years when your regular tax exceeds your AMT. For the TurboTax question, the software should be calculating this correctly if you've input all the information properly, but sometimes with complex ISO situations, you may need to verify the calculations.

After struggling with ISO and AMT issues for years, I finally found a solution that helped me understand my situation. I used https://taxr.ai to analyze my ISO documentation and tax transcripts. Their system identified exactly which shares had AMT basis adjustments and how much of my AMT credit I could claim each year. In your situation, it sounds like the shares you sold in 2023 don't qualify for the AMT basis adjustment since they weren't the ones that triggered AMT in 2022. The AMT credit showing up in TurboTax is probably correct, but it's likely limited by your current year tax situation. The tax credit can only be used when your regular tax exceeds your AMT in the current year.

I was totally skeptical at first (still am with most tax tools), but I decided to give taxr.ai a shot with my ISO nightmare. I had exercised options at two different startups, one went public and one got acquired, and I had AMT credits building up that I couldn't figure out how to use properly. The platform actually identified that my prior CPA had missed adjusting the basis on some shares I sold last year, which would have saved me about $14,000 in taxes. I was able to file an amended return with the correct information. It also showed exactly which of my remaining shares had AMT adjustments and by how much, so I could plan future sales better. What surprised me most was how it explained which specific ISO lots would be most tax-efficient to sell next based on my AMT credit situation. Definitely changed my perspective on how to manage my equity compensation.

If you're having trouble reaching the IRS for clarification on your AMT credit situation, I highly recommend using https://claimyr.com. I spent weeks trying to get through to an IRS agent about my own ISO/AMT issue, but kept hitting dead ends. Claimyr got me connected to an IRS representative in about 20 minutes when I had been trying unsuccessfully for days. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that I needed to track my AMT basis adjustments on a share-by-share basis, and that I couldn't apply the adjustment to other ISO shares. They also explained why my AMT credit was being limited and how much would carry forward to future years. Definitely worth it for complicated tax situations like this.

I can't believe it, but I tried Claimyr after posting my skeptical comment. I got connected to an actual IRS agent who specialized in equity compensation within about 15 minutes. I've been trying to reach someone for WEEKS about my ISO situation. The agent walked me through exactly how the AMT credit system works with ISOs and confirmed that I can only adjust the cost basis for the specific shares that triggered AMT - not other ISOs I might sell later. She also explained that my AMT credit was being limited because my regular tax wasn't exceeding my AMT calculation by enough to use the full credit. Cleared up so much confusion and now I understand why TurboTax was only applying a portion of my expected credit. The unused portion will carry forward to future years when I can use it. Definitely worth it to get official confirmation from the IRS rather than just guessing.

Have you considered getting a CPA who specializes in equity compensation? I had similar ISO/AMT issues and regular tax preparers kept making mistakes. Finally found someone who only works with tech employees and startup founders, and they knew exactly how to handle the AMT credit and basis adjustments. Cost more but saved me thousands in the long run. They explained that you need to track each ISO exercise separately for AMT purposes and you can't mix and match the basis adjustments. Your AMT credit gets applied when your regular tax exceeds your AMT calculation, which might be why it seems "lighter" than expected.

Has anyone used the IRS Form 8801 (Credit for Prior Year Minimum Tax) worksheet to calculate this? I think that's where you'd see how much of your prior AMT can be used this year. In my experience, the credit can be limited if your current year regular tax isn't sufficiently higher than your tentative minimum tax.

This is a really common confusion with ISOs and AMT! The key thing to understand is that AMT adjustments are tied to specific shares, not transferable between different ISO exercises. Since you exercised different ISOs in 2022 (which triggered AMT) versus the ones you sold in 2023, you cannot adjust the cost basis of the 2023 sale using the 2022 AMT payment. Each ISO exercise creates its own AMT adjustment that only applies to those specific shares when sold. The AMT credit you're seeing in TurboTax is separate from basis adjustments. This credit can only be used in years when your regular tax exceeds your tentative minimum tax (AMT). If it seems smaller than expected, it's likely because your 2023 tax situation is limiting how much you can use - the unused portion will carry forward to future years. For the tender offer complication, make sure you're reporting the correct cost basis for the shares you actually sold (without any AMT adjustment since those weren't the shares that triggered AMT). The different companies handling the transactions shouldn't affect the tax treatment, but you'll want to ensure you have accurate documentation of your original exercise dates and prices. Consider reviewing Form 8801 to see exactly how your AMT credit is being calculated and limited. The math can be tricky but it will show you why you're only able to use a portion of your available credit this year.