The AMT calculation follows a specific sequence. Here's every step, with real numbers you can follow along with.

  1. Figure out your Total Income
  2. Subtract above-the-line deductions to get your AGI
  3. Subtract additional AMT-eligible deductions
  4. Add in your ISO Exercise Spread
  5. Subtract your AMT Exemption to get your AMTI
  6. Apply the AMT tax brackets

Step 1: Total Income

Total income includes wages, short and long-term capital gains/losses, IRA distributions, and other sources. For this example:

  • Filing as Single
  • Salary: $140,000
  • Short-term capital losses: $20,000

| Item | Value | |---|---| | Wages, Salaries, Tips | $140,000 | | Net Capital Loss | −$20,000 | | Total Income | $120,000 |

Step 2: Adjusted Gross Income (AGI)

Above-the-line deductions apply to both regular tax and AMT. Using 2026 limits:

| Item | Value | |---|---| | Total Income | $120,000 | | Traditional 401(k) — 2026 limit: $23,500 | −$23,500 | | HSA — 2026 limit: $4,400 | −$4,400 | | Traditional IRA — limit: $7,000 | $0 (using Roth, no deduction) | | Student Loan Interest | −$500 | | Adjusted Gross Income (AGI) | $91,600 |

Step 3: AMT-Eligible Deductions

AMT allows fewer deductions than regular tax. Notably, no standard deduction and no SALT. Mortgage interest does qualify. Assuming $5,000 in mortgage interest paid:

| Item | Value | |---|---| | AGI | $91,600 | | Mortgage Interest | −$5,000 | | Net | $86,600 |

Step 4: ISO Exercise Spread

Formula: (FMV − Strike Price) × Options Exercised

For this example: 1,500 options, strike price $1.00, FMV $5.00 at exercise, none sold this year.

| Item | Value | |---|---| | FMV | $5.00 | | Strike Price | $1.00 | | Spread per option | $4.00 | | × Options Exercised | 1,500 | | Total ISO Spread | $6,000 |

| Item | Value | |---|---| | Net from Step 3 | $86,600 | | + ISO Exercise Spread | +$6,000 | | AMTI for Exemption | $92,600 |

If you exercised and sold ISOs in the same calendar year, exclude them here. That's a disqualifying disposition already counted in your regular income.

Step 5: AMT Exemption (2026)

| Filing Status | Exemption | Phaseout Threshold | |---|---|---| | Single | $90,100 | $500,000 | | Married Filing Jointly | $140,200 | $1,000,000 | | Married Filing Separately | $70,100 | $500,000 |

Since our AMTI of $92,600 is well below the $500,000 phaseout threshold, we get the full exemption:

| Item | Value | |---|---| | AMTI for Exemption | $92,600 | | − AMT Exemption | −$90,100 | | Alternative Minimum Taxable Income (AMTI) | $2,500 |

Step 6: Calculate the AMT

2026 AMT brackets:

| Rate | Threshold | |---|---| | 26% | $0 | | 28% | $244,500 |

With an AMTI of only $2,500, we're well below the 28% threshold — a flat 26% applies:

| Line Item | Value | |---|---| | Wages, Salaries, Tips | $140,000 | | Net Capital Loss | −$20,000 | | Above-the-Line Deductions | −$28,400 | | AGI | $91,600 | | Mortgage Interest | −$5,000 | | ISO Exercise Spread | +$6,000 | | AMT Exemption | −$90,100 | | AMTI | $2,500 | | AMT Owed (@ 26%) | $650 |

But Do You Actually Owe $650?

You only pay the larger of your regular income tax or AMT — never both. In this example the salary + deductions would likely produce a higher regular tax, so no AMT would actually be owed. Use our AMT Calculator to run both calculations side by side and see exactly where you land.