The AMT crossover point: exercising ISOs tax-free
The crossover is the point where your tentative minimum tax equals your regular tax. Below it, an ISO exercise costs you the strike price and nothing else.
Finding it
Compute your regular tax for the year, then solve for the ISO adjustment that makes tentative minimum tax equal to it. Divide the headroom by the per-share spread to get shares.
Using it every year
Crossover exercising turns a single painful exercise into a multi-year programme that converts options into long-term-capital-gain shares with no AMT.
What moves the line
Bonuses, RSU vesting, capital gains, state taxes and filing status all shift the crossover. Recompute before each tranche, not once.
This article is educational and not tax, legal, or financial advice. Talk to a CPA or tax advisor about your specific situation.