Tax
AMT (Alternative Minimum Tax)
Quick definition
Parallel tax system that ensures high-income individuals pay a minimum tax. Often triggered by ISO exercises with large unrealized spreads.
AMT (Alternative Minimum Tax) is a parallel tax calculation that adds back certain deductions and preference items. For startup employees, the big trigger is ISO exercise: the spread between exercise price and FMV is an AMT preference item — you pay AMT on phantom income even though no cash is received. The AMT credit can be recovered in future years, but cash-out risk at exercise is real. Plan ISO exercises around AMT exposure.
Related tax terms
R&D Tax Credit
Federal credit for qualified research expenses, usable against payroll tax by startups.
Delaware Franchise Tax
Annual tax for Delaware corporations, often quoted wildly too high if calculated incorrectly.
Nexus (Sales Tax)
The connection with a state that triggers a tax-collection obligation.
QSBS (Qualified Small Business Stock)
Tax exemption for gains on qualifying startup stock held 5+ years.
Frequently asked questions
- What is AMT (Alternative Minimum Tax)?
- AMT (Alternative Minimum Tax) is a parallel tax calculation that adds back certain deductions and preference items. For startup employees, the big trigger is ISO exercise: the spread between exercise price and FMV is an AMT preference item — you pay AMT on phantom income even though no cash is received. The AMT credit can be recovered in future years, but cash-out risk at exercise is real. Plan ISO exercises around AMT exposure.
- Why is AMT (Alternative Minimum Tax) important for startups?
- AMT (Alternative Minimum Tax) is a tax concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does AMT (Alternative Minimum Tax) belong to?
- AMT (Alternative Minimum Tax) is a Tax term in the StartupCFO finance glossary — alongside other tax concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about AMT (Alternative Minimum Tax)?
- Beyond this definition, see the related tax terms below, or explore StartupCFO's insights and tools that put AMT (Alternative Minimum Tax) in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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