Will AMT on ISO option exercise be offset by my capital loss for tax calculations?

Wait, so there's literally no benefit to having a big capital loss when it comes to AMT calculations? That seems unfair. Couldn't you potentially exercise fewer ISOs to keep the AMT impact lower? Or maybe split the exercise between tax years?

Capital losses do factor into your overall tax situation, but they don't directly offset the AMT income adjustment from ISO exercises. The AMT system was designed to ensure certain tax benefits don't completely eliminate tax liability. You've hit on some good strategies. Exercising fewer shares is definitely one approach to manage your AMT exposure. Splitting exercises between tax years can also help, especially if you anticipate having capital gains in future years that would offset your carried-forward losses. Another option is to exercise early in the year to give yourself time to potentially disqualify the disposition (sell the shares) if the stock value drops, which would eliminate the AMT adjustment.

How accurate was the calculation? I've been burned by tax software before when it comes to AMT and stock options. Does it handle state taxes too? I'm in California and they have their own version of AMT.

I'm skeptical about specialized tax tools. Did you verify the results with an actual tax professional? Seems risky to trust something online with such complex tax decisions that could cost thousands.

The calculations were spot-on when I compared them with what my CPA ultimately filed. It correctly predicted my AMT liability down to a few hundred dollars, which was impressive given the complexity. Yes, it handles state-specific calculations including California's own AMT system. That was actually one of the main reasons I used it - California's tax treatment of ISOs can be even more aggressive than federal in some cases. I actually did verify with my accountant afterwards, and she was impressed with the accuracy. She said it saved her time explaining the concepts to me since I came in with a much better understanding of my situation. The reports it generates were detailed enough that she could spot-check the logic.

Does this actually work? I've tried calling the IRS multiple times about my options and never got through. How long did you end up waiting even with this service?

No way any service can get you through to the IRS faster. They're notoriously understaffed and probably just take your money for something you could do yourself by calling early in the morning. Did they connect you with someone who actually understood ISOs and AMT? Most phone reps struggle with basic questions.

Yes, it absolutely works. Instead of me sitting on hold for hours, their system does it for you. When they reach an agent, you get a call back to connect with them. I waited about 3 hours total, but I was doing other things during that time instead of listening to hold music. The difference is you're not actively waiting on the phone - they call you when an agent is ready. The rep I spoke with was surprisingly knowledgeable about AMT and ISO treatment. I think it depends on who you get, but you can always ask to be transferred to someone who specializes in more complex tax situations. The IRS does have specialists for different tax areas, including equity compensation.

But isn't the 83(b) election only useful when you first receive the options, not years later when you're deciding whether to exercise? I thought there was a 30-day window to file the 83(b) after the initial grant.

You're absolutely right about the timing limitations of the 83(b) election. It's only available within 30 days of receiving a grant with vesting restrictions. I should have been clearer that this is more of a forward-looking strategy for future grants, not something that would help with existing ISOs that were granted some time ago. For current ISOs that are already vested, the AMT planning strategies mentioned by others (like exercising in batches across tax years) would be more applicable.

How exactly does that AMT credit work? Is it a dollar-for-dollar credit for what you paid in AMT previously? And are there limits to how much you can claim each year?

The AMT credit works by carrying forward the amount you paid in AMT that was attributable to timing differences (like ISO exercises) rather than permanent preference items. It's generally dollar-for-dollar, but you can only use it in years when your regular tax exceeds your tentative minimum tax. There's no annual limit on how much credit you can claim - it's based on the difference between your regular tax and AMT in the current year. So if you pay $10k in AMT this year from ISO exercises, that becomes a credit you can use when your regular tax situation changes in future years. It's definitely worth tracking since it can provide significant tax relief down the road, especially if your startup goes public or gets acquired.