A tender offer is one of the few reliable ways to turn private-company shares into cash before an exit. But if what you hold is a grant of unexercised incentive stock options (ISOs), participating means exercising first — and a tax-law change that took effect in 2026 has quietly made that exercise more expensive for higher earners. The alternative minimum tax (AMT), the parallel tax system that ISO exercises can trigger, now reaches further down the income scale and bites harder once it does.
This is a plain-English walkthrough of what changed, how it connects to a tender offer specifically, and why two colleagues selling the same dollar amount in the same tender can keep meaningfully different after-tax proceeds. It is not a recommendation about whether to participate — only the mechanics you will want to have modeled before the window closes.
This is not tax advice. Consult a qualified tax professional before you exercise stock options or sell private company shares. AMT on an ISO exercise can be substantial, and the right move depends on your equity type, your other income, your state, and your full tax picture.
The 2026 changes come from the tax law commonly referred to as the One Big Beautiful Bill Act (OBBBA). The figures below are drawn from public reporting on the enacted law and the 2026 inflation-adjusted amounts, per the Tax Foundation; the mechanics of how an ISO exercise enters the AMT calculation are set out in the IRS instructions for Form 6251. Earlyasset is not a tax advisor.
What Actually Changed for 2026
The AMT runs alongside your regular federal tax. You calculate what you owe both ways and pay whichever is higher. An exemption amount shelters a slice of AMT income from the calculation, and that exemption shrinks — phases out — as income rises. The 2026 law left the headline exemption high but changed the phaseout in two ways that matter for large ISO exercises.
1. The exemption stayed high. For 2026 the AMT exemption is $90,100 for single filers and $140,200 for married couples filing jointly. That part is unchanged in spirit from the prior decade.
2. The phaseout starts much earlier. The exemption now begins to disappear at $500,000 of AMT income for single filers and $1,000,000 for joint filers. In 2025 those thresholds were substantially higher — above $600,000 for single filers and above $1.2 million for joint filers — so the level at which high earners start losing the shelter dropped by roughly $125,000 (single) and $250,000 (joint).
3. The phaseout rate doubled. Above the threshold, the exemption used to disappear at 25 cents per additional dollar of AMT income. Starting in 2026 it disappears at 50 cents per dollar. That is the change with the sharpest teeth for someone stacking a big ISO spread on top of an already-high salary.
Key concept
The AMT rate itself (26% or 28%) did not change. What changed is who pays and how much of the exemption they keep. Because the exemption now phases out at 50 cents on the dollar starting at a lower income, each extra dollar of AMT income above the threshold effectively enlarges the AMT base by $1.50 — the dollar plus 50 cents of lost shelter. That range is often called the "bump zone."
Why the AMT Shows Up When You Sell in a Tender
You cannot sell a share you do not own. If your equity is unexercised ISOs, the first step to participating in a tender offer is to exercise — to pay your strike price and convert options into actual shares. That exercise, not the sale, is what puts you in contact with the AMT.
The trigger is the bargain element: the difference between the fair market value of a share at exercise (for a private company, the most recent 409A valuation) and the strike price you pay. For an ISO, that spread produces no regular-tax income at exercise — but it is added to your AMT income as a "preference item" if you hold the shares past year-end. On a large spread, that addition is what can push your AMT above your regular tax and create a cash bill on a gain you have not turned into cash. (For the full mechanics of that exercise-stage tax, see the tax implications of exercising stock options.)
Here is the fork that decides whether the AMT even enters the picture in a tender:
Exercise and sell the same year (disqualifying disposition). If you exercise ISOs specifically to tender them and the sale settles in the same calendar year, you have made a disqualifying disposition. The bargain element is taxed as ordinary income for regular tax, and it is generally not treated as an AMT preference item for that year. You lose the ISO's long-term-capital-gains benefit, but you also sidestep the AMT question. This is the common path when someone exercises only to participate in the tender.
Exercise and hold across December 31. Tenders frequently cap how much of your position you can sell. If you exercise a full grant but can only tender a portion, the un-sold exercised shares you carry past year-end are ISO shares held — and their bargain element becomes an AMT preference item. This is the path where the 2026 changes matter most, because the held spread lands on top of your other income and runs through the new, faster phaseout.
⚠️ The AMT question is really a timing question. Exercising and holding a large ISO spread across year-end is what creates AMT exposure; exercising and selling the same year converts the spread to ordinary income instead. Neither is "better" in the abstract — they are different tax outcomes, and which one you land in depends on how much of your position the tender lets you sell and when the transaction closes.
Two Employees, One Tender, Different Net Proceeds
The 2026 rules make a point that is easy to miss: the size of your sale does not determine your after-tax proceeds. Two people can exercise the identical spread and tender the identical number of shares and still keep different amounts, because the AMT depends on the rest of their return. Consider two colleagues at the same company, each holding ISOs with a $2 strike, each facing a 409A fair market value of $22 — a $20 bargain element per share.
Example — same exercise, different phaseout
Both exercise 30,000 ISOs. Bargain element: $20 × 30,000 = $600,000. The tender lets each sell 20,000 shares; both hold the remaining 10,000 exercised shares across year-end, so $200,000 of spread becomes an AMT preference item for each.
Employee A has $180,000 of other income. Even after adding the $200,000 held spread, their AMT income stays below the $500,000 single-filer threshold, so they keep the full $90,100 exemption. The AMT on the held spread is real but contained.
Employee B has $520,000 of other income and is already above the threshold before the exercise. Every dollar of the $200,000 held spread lands in the bump zone, where 2026's 50% phaseout wipes out the remaining exemption twice as fast as the old 25% rate would have. Same shares, same tender, same spread — but Employee B keeps less, and the gap is larger than it would have been in 2025.
The exact dollar figures depend on each person's full return, deductions, and state — which is precisely the point. Because the 2026 phaseout starts lower and runs twice as fast, the after-tax outcome of an identical exercise now varies more with a person's other income than it did before. Two shareholders reading the same tender email are not looking at the same net number.
A third scenario avoids the AMT question entirely: an employee who exercised and paid for their ISO shares in a prior year, held them long enough to satisfy the ISO holding periods, and now simply sells qualified shares in the tender. Their sale is a long-term capital gain, with no fresh AMT preference this year — a reminder that when you exercised, relative to when you sell, drives the tax as much as the tender price does. The holding-period side of that story is covered in tax considerations when selling private company shares.
The Bump Zone, Concretely
The doubled phaseout rate is worth seeing in isolation, because it is the least intuitive part. Above your threshold, you are not just paying AMT on the extra income — you are also losing exemption as your income climbs, and that lost shelter is itself now taxed.
Under the old 25% phaseout, each additional dollar of AMT income above the threshold added $1.25 to the AMT base (the dollar plus 25 cents of lost exemption). Under 2026's 50% phaseout, that same dollar adds $1.50. Applied at the 28% AMT rate, the effective marginal AMT cost inside the bump zone rises accordingly. For a high earner exercising a six-figure ISO spread and holding it, that difference compounds across every dollar of the spread that sits above the threshold.
Key concept
The bump zone is temporary, not permanent. Once your income is high enough that the exemption is fully phased out, the extra $0.50-per-dollar effect stops — there is no exemption left to lose. The people most affected by the 2026 change are those whose AMT income lands inside the phaseout range, which a large held ISO spread can push them into even if their salary alone would not.
What to Model Before You Exercise Into a Tender
The tax on exercising into a tender is not one number but a short sequence of questions, best answered before you commit shares to the window:
Step 1: Size the bargain element. Current 409A fair market value minus your strike, times the number of options you plan to exercise. This single figure drives everything that follows. If your strike equals the current FMV, the spread — and the exercise-stage tax — is near zero.
Step 2: Decide what you will actually hold. Work out how many shares the tender lets you sell versus how many you would exercise. Shares you sell the same year are a disqualifying disposition (ordinary income, no AMT preference). Shares you hold across year-end are where the AMT preference — and the 2026 phaseout — applies.
Step 3: Estimate your AMT income against the thresholds. Add the held spread to your other income for the year and compare it to the 2026 phaseout thresholds ($500,000 single / $1,000,000 joint). Where you land relative to that line — and how far into the bump zone you go — is what separates two otherwise-identical exercises.
Step 4: Plan the cash. An ISO exercise has no withholding, so any AMT it creates is a bill that arrives when you file, on shares you may not have fully sold. Size the total cash cost — strike plus any tax — against what the tender will actually pay you. If the tender is capped and you are holding a large balance, the funding gap is the risk to plan for. Ways shareholders bridge that gap, including exercising into the tender itself, are covered in cashless exercise of stock options.
Step 5: Run the return both ways with a professional. Whether a given exercise triggers AMT, and how much, can only be known by computing the return under both systems. That is a conversation for a CPA or tax attorney — ideally before the tender window closes, not the following April.
For more on this topic
For the full definitional guide to the exercise-stage tax — the bargain element, ordinary income on NSOs, AMT on ISOs, the AMT credit, and the 83(b) election — see Tax Implications of Exercising Stock Options: AMT, ISOs vs. NSOs, and What You'll Actually Owe.
The Takeaway
The 2026 AMT changes did not touch the AMT rate or the exercise mechanics — but by lowering the phaseout threshold and doubling the phaseout rate, they widened the gap between two people running the same exercise. When a tender offer lands in your inbox, the first tax question is not "what is the price?" It is "if I exercise to participate, how much will I hold across year-end, and where does that put my AMT income?" Answer that with real numbers — your bargain element, your other income, and an independent estimate of what the shares are actually worth — and the decision becomes arithmetic instead of guesswork. For a broader decision framework on the tender itself, see how to approach a company-run tender offer, and for how the sale mechanics work end to end, tender offers explained.
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Earlyasset, Inc. does not provide investment advice and is not a registered investment adviser. Pricing estimates are algorithmic and do not constitute an offer to buy or sell securities. All transactions respect the company's right of first refusal (ROFR) and any transfer restrictions in your equity agreements. Direct liquidity is provided by Earlyasset Capital, LLC, a separate entity from Earlyasset, Inc.
Tax disclaimer: This article is general educational content only and does not constitute tax, legal, or financial advice. Tax treatment of stock option exercises and secondary sales — including AMT exposure, the exemption phaseout, ISO/NSO treatment, disqualifying dispositions, holding periods, and the AMT credit — varies significantly based on equity type, holding period, state of residence, individual circumstances, and other factors. Consult a qualified CPA, tax attorney, or financial advisor before making any transaction decision. Earlyasset, Inc. is not a tax advisor and does not provide tax guidance.
Source note: The 2026 AMT figures described here are based on public reporting on the enacted tax law (the One Big Beautiful Bill Act) and the 2026 inflation-adjusted amounts, as of August 2026. Tax figures are indexed and can change; verify current-year amounts with the IRS or a qualified tax professional before acting.