medium · Certified Financial Planner General Principles
The Ellison household includes an executive who holds incentive stock options (ISOs). The client's regular tax liability is 65,000 and their Tentative Minimum Tax (TMT) before exercising any options is 50,000.
According to the 2026 mastery framework, to what point should the executive exercise the ISOs to maximize the benefit without triggering immediate Alternative Minimum Tax (AMT)?
- Stop exercising once the bargain element reaches 50,000 to stay within the safe harbor.
- Exercise all options immediately to start the one-year holding period for long-term capital gains.
- Exercise options only up to the AMT exemption amount of 140,200.
- Up to the point where the TMT equals the regular tax liability of 65,000.
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