Under $100K Equity: Limited AMT and Straightforward Timing Strategy

With equity worth under $100,000, your AMT exposure is limited and the planning is straightforward. Understand why exercise timing still matters and what the ISO $100K annual vesting rule means for your grants.

AMT exposure is limited. If you hold incentive stock options (ISOs), exercising them triggers an Alternative Minimum Tax preference item equal to the spread between exercise price and fair market value. Under $100K in equity value, this spread is typically small enough that it will not push you into AMT territory, especially after the TCJA raised exemption thresholds.

The $100K ISO vesting rule still applies. ISOs that first become exercisable in any calendar year are treated as ISOs only up to $100K in value (measured at grant). Amounts above that threshold are automatically reclassified as non-qualified stock options (NSOs). At your equity level, you are unlikely to bump into this limit, which simplifies planning.

Exercise timing is straightforward. A CPA can model whether exercising this year or next produces a lower total tax bill, but the stakes are modest enough that the difference is usually hundreds of dollars rather than thousands.

The tradeoff: Simpler planning does not mean no planning. Even at this level, exercising ISOs without checking AMT projections can produce an unexpected tax bill in April.