---
title: "Texas ISO AMT Calculator (2026): Exercise Limits and Worked Examples"
slug: tx-iso-amt-trap
publishedAt: 2026-06-16T17:00:14.000Z
updatedAt: 2026-06-17T16:41:54.884Z
author: "Mike Navarro"
authorSlug: mike-navarro
category: "State Tax"
tags: ["Texas", "ISO", "AMT", "Stock Options", "State Tax"]
excerpt: "Texas iso amt calculator: model your ISO exercise with zero state tax. See AMT-free share limits and worked examples — run your numbers in 60 seconds."
canonical: https://myequitytax.com/blog/tx-iso-amt-trap
---
A Texas iso amt calculator only needs federal inputs: Texas has no state income tax, so an ISO exercise has zero state tax impact. Your only exposure is the federal AMT triggered by the bargain element (FMV minus strike, times shares).
[**Open the Texas ISO AMT calculator with these inputs prefilled →**](/calculator/iso?state=TX&shares=10000&fmv=12&strike=2&salary=180000)
## How a Texas ISO AMT calculator treats your exercise
Texas is the simplest state in the country for equity compensation. It has **[no state income tax](https://comptroller.texas.gov/taxes/)**, which means an ISO exercise — and any later sale of the shares — carries **zero state tax**. There is no Texas AMT, no state estimated payment to schedule, and nothing to file with the state on the exercise itself. The only tax that can bite is federal.
The federal AMT calculation has three moving parts ([IRS Form 6251](https://www.irs.gov/forms-pubs/about-form-6251)):
1. The **bargain element** — `(FMV − strike) × shares exercised` — is added to your AMT income for the year.
2. The **AMT exemption** is subtracted (a fixed amount that phases out at high incomes).
3. The remainder is taxed at **26% up to $239,100 of AMT income, then 28% above** (2025 thresholds; 2026 figures publish in late 2025).
Because Texas adds nothing on top, your entire decision comes down to one federal number: the AMT-free share count. Below that line you owe regular tax only; above it, the bargain element pushes your tentative minimum tax past your regular tax and the difference becomes a cash bill ([IRS Pub 525](https://www.irs.gov/publications/p525)). The examples below show exactly where that line falls for three common profiles.
## Worked examples (Texas, 2025)
Each example shows how many ISOs you can exercise before AMT kicks in, using the EquityTax engine. Numbers match what the calculator returns for the inputs shown.
### Example 1 — Early-stage exercise, single filer
**Inputs:** $180K W-2 income, single filer, 10,000 vested ISOs at $2 strike and $12 FMV.
**Result:**
- Federal regular tax (without ISO exercise): $32,267
- Federal AMT after exercising all 10,000 shares: $49,894
- Texas state tax impact: $0
- **Cash needed at exercise (estimate):** $37,627
- **AMT-free exercise limit:** 3,220 shares
At $32,267 the regular bill and the AMT line are the same until you cross 3,220 shares. Exercise everything and the bargain element adds $100,000 to your AMT income, lifting the total to $49,894 — an extra federal hit you fund out of pocket on top of the $20,000 strike cost.
[Run this scenario in the calculator →](/calculator/iso?state=TX&shares=10000&fmv=12&strike=2&salary=180000)
### Example 2 — Mid-stage exercise, married filing jointly
**Inputs:** $250K W-2 income, married filing jointly, 20,000 vested ISOs at $2 strike and $40 FMV.
**Result:**
- Federal regular tax: $38,134
- Federal AMT after full exercise: $239,658
- Texas state tax impact: $0
- **Cash needed at exercise:** $241,524
- **AMT-free exercise limit:** 886 shares
As FMV climbs the AMT-free limit collapses. Here it drops to just 886 shares — exercise all 20,000 and the bargain element of $760,000 detonates a $239,658 federal bill. Texas takes nothing, but the federal AMT alone is far larger than the example above.
[Run this scenario in the calculator →](/calculator/iso?state=TX&shares=20000&fmv=40&strike=2&salary=250000)
### Example 3 — Late-stage exercise, married filing jointly
**Inputs:** $350K W-2 income, married filing jointly, 30,000 vested ISOs at $2 strike and $120 FMV.
**Result:**
- Federal regular tax: $62,134
- Federal AMT after full exercise: $1,084,418
- Texas state tax impact: $0
- **Cash needed at exercise:** $1,082,284
- **AMT-free exercise limit:** 220 shares
This is the AMT trap at its worst. With a $120 FMV the AMT-free limit is only 220 shares out of 30,000. A full exercise generates a $3,540,000 bargain element, wipes out the AMT exemption entirely, and produces a $1,084,418 federal bill. Living in Texas saves you a state tax line — but it does nothing to soften a seven-figure federal AMT bill. Timing is everything here.
[Run this scenario in the calculator →](/calculator/iso?state=TX&shares=30000&fmv=120&strike=2&salary=350000)
## Strategies for Texas option holders
The single biggest lever is **timing**. Splitting an exercise across two tax years can keep both years below the AMT crossover and turn a five-figure tax bill into a small one — sometimes zero.
1. **Find your AMT-free limit** for this year, exercise at most that number, and roll the rest into next year's exercise window.
2. **If the bargain element is small**, exercise everything that's vested and start the long-term capital gains clock.
3. **If you exit a startup mid-year**, model the post-IPO scenario — the AMT-free limit shrinks fast as FMV climbs.
[Open the calculator with your inputs →](/calculator/iso?state=TX)
## Frequently asked questions
**Does Texas tax ISO exercises?**
No. Texas has no state income tax, so exercising incentive stock options has zero state tax impact. Your only exposure is the federal alternative minimum tax on the bargain element.
**Do I pay any Texas tax when I sell the shares later?**
No. Texas also has no state capital gains tax, so a later sale incurs only federal capital gains tax.
**How many ISOs can I exercise in Texas without triggering AMT?**
It depends on your income, filing status, strike, and FMV — not your state. In the examples above the AMT-free limit ranged from 3,220 shares down to 220 shares as FMV rose. Run your own grant through the [calculator](/calculator/iso?state=TX) to find your exact line.
**Why is the federal AMT the same in Texas as in a high-tax state?**
AMT is a federal calculation. Living in Texas removes the state tax line entirely, but the federal AMT on your bargain element is identical to what a filer in any other state would owe.
## Sources
- IRS Form 6251, *Alternative Minimum Tax (Individuals)* — exemption amounts, phase-out thresholds, AMT rates.
- IRS Publication 525, *Taxable and Nontaxable Income* — ISO bargain-element treatment.
- EquityTax Texas ISO AMT Calculator (internal engine, last verified 2026-05-09).
Estimate only — not financial or tax advice. Consult a qualified CPA before making decisions about exercising stock options, selling equity, or other financial moves.