San Jose ISO Tax CPA & AMT Planning Accountant

Manage the complexities of the Alternative Minimum Tax (AMT). Proactive AMT projection modeling, early-exercise 83(b) planning, and AMT credit recovery strategies for Silicon Valley startup founders and tech executives holding Incentive Stock Options.

30-minute discovery call • Discuss your equity situation • Determine next steps

What does an ISO tax CPA actually help with?

An ISO-focused tax CPA helps you model the tax consequences of exercising, holding, or selling Incentive Stock Options before you make the transaction. Depending on your situation, that can include projecting the federal AMT adjustment, California AMT, AMT basis, potential minimum tax credits, qualifying versus disqualifying dispositions, and the tax consequences of a future sale.

The goal is not simply to calculate last year’s tax bill. It is to understand the tax consequences before an exercise or sale creates an irreversible transaction.

AMT Projection Modeling (Pre-IPO Case Study)

• The Event: A San Jose Director at a $13B pre-IPO startup wants to exercise 20,000 ISO shares. The strike price is $2/share ($40,000 cost). The current 409A Fair Market Value has skyrocketed to $32/share ($640,000 total value).
• The Tax Threat: Exercising all 20,000 shares creates a $600,000 ISO bargain element for federal AMT purposes ($32 FMV − $2 exercise price × 20,000 shares). While the exercise itself generally does not create regular federal taxable income, the AMT adjustment can substantially increase alternative minimum taxable income. The actual federal and California tax impact depends on filing status, other income, deductions, exemptions, and prior-year AMT credits—but it can easily result in a six-figure tax liability on illiquid shares.
• The Execution: Using our AMT modeling, we project the client’s exact “AMT Buffer”—identifying the volume of shares they can exercise this tax year (e.g., 4,200 shares) where the AMT exemption may entirely absorb the bargain element, resulting in minimizing or avoiding the AMT hit.
• The Result: By spreading the exercise over multiple calendar years according to a modeled schedule, the client begins the clock on their long-term capital gains holding period while actively managing their exposure to the AMT.

What We Model Before You Exercise or Sell

The value of an ISO tax plan is in seeing the interaction between the moving pieces before the transaction occurs.

Important: Early Exercise and Section 83(b)

Section 83(b) is not simply a universal “ISO tax election.” Statutory stock options are governed by special rules, and the federal income-tax and AMT treatment can differ. In some early-exercise situations an 83(b) election can matter for AMT purposes, so the transaction should be reviewed based on the actual option agreement, vesting restrictions and exercise facts.

If an 83(b) election is appropriate, the filing deadline is strict. Do not rely on a generic checklist—confirm the treatment of your specific equity award before filing.

What to Bring to an ISO Tax Review

You do not need to have everything perfectly organized before contacting us. These are the records that are typically most useful.

Is an ISO Tax Consultation Right for You?

This page is especially relevant if you are dealing with one or more of these situations:

• You have ISOs at a private or recently public company.
• You are considering exercising a significant number of options.
• Your company’s 409A value has increased substantially.
• You are concerned about AMT on shares you cannot easily sell.
• You previously exercised ISOs and may have AMT credits.
• You are approaching an IPO, tender offer, acquisition or other liquidity event.
• You want your equity decisions integrated into your broader California tax plan.

Why can an ISO create AMT if I haven’t sold the stock?

For regular federal income tax, an ISO generally does not create income when exercised. For AMT purposes, however, the applicable spread between the stock’s FMV and exercise price can create an AMT adjustment. The actual tax due depends on the taxpayer’s complete AMT calculation.

Does California have separate AMT rules?

Yes. California has its own AMT calculation, and California’s treatment of ISO exercises should be modeled separately from the federal calculation.

Can I recover AMT paid in a prior year?

Potentially. Federal minimum tax credits can sometimes be used in later years, subject to the applicable rules. Prior-year Form 8801 and the underlying AMT history are important when determining what credits may be available.

What is the difference between a qualifying and disqualifying ISO sale?

A qualifying disposition generally requires satisfying both the two-year period from grant and one-year period from exercise. A sale that occurs before those requirements are satisfied can produce different ordinary-income and capital-gain consequences.

Should I exercise all of my ISOs at once?

There is no universal answer. The appropriate analysis can depend on your income, exercise price, current FMV, liquidity, concentration risk, filing status, California tax position, prior AMT and your expected future liquidity. Modeling multiple scenarios is generally more informative than applying a single rule of thumb.

Primary Tax Sources

The tax treatment of equity compensation can change and depends on the taxpayer’s facts. These primary sources are useful starting points for the concepts discussed on this page.

• IRS Form 6251 — Alternative Minimum Tax for Individuals.
• IRS Form 3921 — Exercise of an Incentive Stock Option.
• IRS Form 8801 — Credit for Prior Year Minimum Tax.
• California FTB Publication 1004 — California treatment of equity-based compensation and AMT.

This page provides general educational information and is not individualized tax, legal, investment or financial advice. Tax treatment depends on the taxpayer’s specific facts, applicable law and the terms of the applicable equity plan.

Let’s Model the Tax Consequences First

Schedule a 30-minute discovery call with Brandy Phuong, CPA & EA to discuss your ISO position, AMT concerns, California tax exposure and the next step.

No commitment to ongoing services is implied by scheduling a discovery call.