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ISO Exercised and Held in 2021 (Do I need to delete "ISO Purchase Summary" in 2022 tax return?)

Forum|Forum|3 years ago
March 16, 2023
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Hello,

I have exercised and held ISOs in 2021. I have reported them on my 2021 tax return and paid AMT. Now, for 2022 the entry is still there in the "ISO Purchase Summary". So, do I need to delete this entry or do I keep it there until I sell the corresponding ISOs? This also creates a Exercise Stock Options Worksheet in the forms section.

Best answer by DavidD66

You should leave the entry there until you sell some or all of the shares from exercising the ISOs. It will make reporting the sale much easier, from an AMT standpoint.

D

DavidD66Answer

You should leave the entry there until you sell some or all of the shares from exercising the ISOs. It will make reporting the sale much easier, from an AMT standpoint.

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W

w15Author

Ok. Thank you. I was worried that it might be messing something up.

I am getting the AMT that I paid in 2021 back as a tax credit for 2022. Is this correct?

I thought that I would only get AMT credit back when I sell the ISOs.

HopeS

Yes, AMT credits earned in one year can be used to lower your tax bill in later tax years.

If you buy and hold, you will report the bargain element as income for Alternative Minimum Tax purposes.

Report this amount on Form 6251: Alternative Minimum Tax for the year you exercise the ISOs.
When you sell the stock in a later year, you must report another adjustment on your Form 6251 for the year of sale.

Unused AMT credits

In the year that you exercise an Incentive Stock Option, the difference between the market value of the stock on the exercise date and the exercise price counts as income under the AMT rules, which can trigger an AMT liability. However, you will also generally earn an AMT credit in that year.

You can use the credit to lower your tax bill in later years. However, there are limitations on when you can use an AMT credit. In some cases, AMT credits cannot be used for several years. Fortunately, a taxpayer-friendly change in 2008 allows individuals with unused AMT credits that are over three years old (so-called long-term unused AMT credits) to cash them in.

For the 2022 tax year, long-term unused AMT credits are those that were earned in pre-2007 years.
Taxpayers with long-term unused credits from pre-2007 years can generally collect at least half their credit amounts by filing their 2022 returns, and the remainder can be collected by filing their 2022 returns.
To figure out the amount of unused AMT credits that can be collected under this rule, fill out Form 8801 (Credit for Prior Year Minimum Tax).

Also, review the link below for more detailed information:

Incentive Stock Options

@w15

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