Suppose I am in California, and I want to try to roughly calculate the AMT i would owe as well as how much i can get back each year for ISO that i plan to hold for many years. Am i doing this right?
Here's the scenario:
- $1 exercise price on 1500 shares. (not early exercisable)
- $101 fair market value at the time of exercise, however not selling
- $100,000 = regular net income (salary)
The regular federal+state tax rate is probably around ~$28k, and assume that will be the case for many more years to come (you can calculate this yourself if you really wanted to)
The spread is $150,000 ((101 - 1) * 1500), so i am assuming that to calculate AMT, i would basically do $100,000 (regular tax) + $150,000 (spread on ISO) = $250,000. AMT rate is ~28% (Federal) + 7% (for CA) = 35%. so the tax that I owe this year is roughly $87,500 (35% * 250,000).
is this $87,500 roughly correct? (i know that AMT also uses some 50k adjustment for amounts less than $330k, but i'm just going to skip that to assume worst case. same with using 28% instead of 26% for federal rate).
if $87,500 is correct, do i get $59,500 of AMT credit? (since AMT 87,500 - Federeal/state 28,000 = 59,500)
suppose I have that ~$60,000 of credit. (if i did my calculation correct on that, which i doubt)
My regular federal+state for $100,000 is usually ~$28,000. Is the AMT basically: 100,000 - 53,600 (AMT adjustment) * (26% + 7%) = $15,312 ?
so that means that i can claim up to 28,000 - 15,312 = $12,688 of credit each year until my $60,000 runs out?
I asked quite a few tax advisors, but surprisingly no one has given me the same answer, so that's why i'm seeking advice on here.
*disclaimer: the actual numbers are obviously not realistic, but the math behind it is important.