AMT tax was $0 but federal tax return went down?

[hivesql3355]

I exercised ISOs and held them. I exercised 40000 shares and the difference between the FMV and the strike price is $1, so i input $40000 as the ISO adjustment. The next window tells me my AMT tax is $0. But then my federal return went from $15000 to $5000......Why did i lose so much of my federal return if I never sold my ISOs and I didn't trigger AMT? FYI Im doing the 2022 year taxes because im behind and using the desktop app.

[DavidD66]

Were you looking at the refund amount at the top of the screen?  If so, it sounds like the software was lagging behind on calculating the refund amount.  Something you did in the program then triggered the program to recalculate the refund.  Adding an adjustment to Alternative Minimum Taxable Income that didn't result in any Alternative Minimum Tax would not reduce your tax liability.  But it might trigger a recalculation of the refund meter.   

[hivesql3355]

No there is no delay. When I change the iso adjustment number, the federal number instantly changes as well. I did some research and I think the real reason the federal refund went down is because I have AMT credit from the previous year. The amount of AMT credit applicable for the current year is limited based on the difference between the standard tax rate and the amt tax rate. So even though amt tax rate this year was less than standard tax rate, when I added the iso adjustment, the difference between amt and standard is now lower, and thus less of the AMT credit can be applied this year.

[DaveF1006]

It depends. The advantage of an ISO is you don't have to report income when you receive a stock option grant or when you exercise the option. You report it only when you sell the stock.

The adjustment that you made isn't necessary at this time. Leave this transaction totally out of your return until you sell the stock.

Incentive Stock Options