Can long-term capital losses reduce AMT income from ISOs?

January 16, 2004

Subject:   Simple FAQ
Date:   Thu, 11 Dec 2003
From:   Anonymous

I could not find this FAQ in your list, but this would seem to be a pretty common issue.

Q. Can long-term capital losses on open market equity (stock) transactions be used to reduce AMT income from an ISO exercise? If so, are such losses limited to $3K/year for purposes of reducing AMT income?


Date:   Wed, 07 Jan 2004


The AMT income from an ISO exercise is ordinary (wages) income. Capital losses are deductible first to the extent of capital gains. Capital losses in excess of capital gains are deductible for up to $3,000 of other income, and any excess is carried over to future years.

Good luck!

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options – Executive Tax and Financial Planning Strategies.

Comments are closed.