A parallel tax calculation that limits certain deductions and exclusions. Exercising incentive stock options is the most common way individuals trigger it.
AMT recalculates your tax without certain deductions and adds back preference items, most commonly the bargain element on incentive stock options exercised and held. If the AMT result is higher than regular tax, you pay the difference, and you may get a credit back in later years.
A same-year sale makes the exercise a disqualifying disposition, which converts the spread to ordinary income instead of an AMT preference. That can be better or worse depending on your bracket; it is a planning decision, not a rule.
Last reviewed September 10, 2026. Tax rules change; confirm current law before acting.
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