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Question
What are some strategies for reducing my AMT tax for some stock options I'm buying?
AI accountant’s answer:

There are a few strategies you can consider to potentially reduce your Alternative Minimum Tax (AMT) liability related to stock options:

1. **Timing of Exercise:** One of the key factors that can trigger AMT is the timing of when you exercise your Incentive Stock Options (ISOs). If you exercise your options and hold the stock, the difference between the exercise price and the fair market value on the date of exercise is considered a preference item for AMT. To potentially reduce AMT, you might consider exercising your options in a year when your income is lower, or spread the exercise of your options over several years to manage the income increase.

2. **Sell in the Same Year:** If you sell the stock in the same year you exercise the options, it generally won't trigger AMT. This is because the income is treated as a short-term capital gain, which is not a preference item for AMT.

3. **Disqualifying Disposition:** If you sell the stock within 2 years of the grant date or within 1 year of the exercise date, it's considered a disqualifying disposition. This means the income is treated as ordinary income, not AMT preference income.

4. **Consider Non-Qualified Stock Options (NSOs):** NSOs do not have the same AMT implications as ISOs. The spread between the exercise price and fair market value at the time of exercise is taxed as ordinary income, not AMT preference income.

Remember, tax strategies can be complex and the best approach depends on your individual circumstances. It's always a good idea to work with a tax professional to understand the potential tax implications and strategies for your situation.

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