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🇺🇸 US · US taxAlternative minimum tax (AMT)
Also called: AMT
In one line
A parallel US tax calculation that can tax the paper gain from exercising ISOs, even though you haven't sold anything.
In plain English
AMT is a second way the IRS calculates your tax to stop high earners paying too little. Exercising ISOs adds the paper spread to this calculation, so you can owe tax on a gain that's still locked in shares.
If you were explaining it to a 5-year-old
It's a backup rule that says: even if you only 'got a bargain' on a toy and didn't sell it, you might still owe a little tax on how good the bargain was.
Why it matters when you sell
AMT can create a surprise tax bill the year you exercise ISOs — often the single biggest reason people sell some shares to cover the cost.
Related terms
Put it to use
When you're ready to go deeper, there's an optional Equity Toolkit and Report.
Sources
Primary references for this term: IRS (US tax). Our definitions are written in plain English and kept evergreen — see the glossary methodology. General information, not advice.
Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.