If you exercised incentive stock options (ISO) this year, there’s a chance you’ll owe the alternative minimum tax (AMT). AMT ensures taxpayers, particularly those with high incomes who can reduce their tax burden to nearly zero with deductions and exclusions, pay at least a minimum level of federal income tax.
IRS Form 6251 is a worksheet that helps you determine if you owe AMT and how much. You can also calculate your estimated AMT using our AMT calculator.
What is Form 6251?
Every year, you need to calculate your regular taxes and your AMT and then pay whichever is higher. Form 6251, or the Alternative Minimum Tax form, is used to calculate whether you owe AMT.
If you’ve been filing taxes for years and never heard of AMT, you’re not alone. Tax preparation softwares like TurboTax determine if you owe AMT for you, so you don’t actively have to calculate AMT or use Form 6251.
How to file Form 6251
Filing Form 6251 involves several steps:
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Gather necessary documents: This includes your W-2, 1099s, Form 3921, and information about any ISOs exercised—plus any other documents needed for filing your regular taxes since you’ll need to calculate your regular tax to determine if you owe AMT.
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Calculate your Alternative Minimum Taxable Income: In Part I of Form 6251, you’ll adjust your taxable income for AMT purposes. This includes adding back certain deductions taken for regular tax purposes and making adjustments for items like exercising ISOs.
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Calculate AMT: Use Part II of Form 6251 to determine whether you owe AMT. You’ll subtract your AMT exemption from your AMT income. AMT exemptions are based on your tax filing status. Our free calculator makes it easy to see if you might owe AMT.
If you owe AMT, you need to add the amount you’re liable for to Form 1040 so your total tax is reported on your federal tax return. When you finish filling out Form 6251, attach it to your personal income tax return.
The IRS provides detailed instructions for Form 6251, so be sure to follow them if you’re filing your taxes yourself.
When to file
Form 6251 should be filed along with your regular tax return (Form 1040 or Form 1040-SR) by the tax filing deadline, typically April 15th. If you've exercised ISOs or have other AMT triggers, it's crucial not to overlook this form.
Understanding and accurately completing this form ensures compliance and optimal financial planning. For personalized advice, always consult with a tax professional.
