I think it's 0.1% of house holds, but it's not strictly the top 0.4% who are impacted. The more you make, the more likely it is that you are impacted, but your household income can be just a couple hundred thousand a year and you could be impacted.

Investopedia is misleading. AMT applies unless they were exercised and sold within the same tax year. AMT thus applies to the vast majority of pre-IPO ISO exercises. Many of those people are not in the top 0.4% incomes (I assume that’s what you meant). Further, this specific AMT scenario is taxing unrealizable gains, since the asset is effectively unsellable.

Regardless of whom it applies to, the situation is deeply unfair. I get that the left is fine with being unfair to the rich and doesn't care at all about writing bad policy anymore as long as the victims of the bad policy are not their in-group but for those of us who aren't radicals and do actually care the situation is concerning.

Investopedia is misleading because the tax event occurs before the sale. You don't pay AMT in the year you sell you pay AMT in the year you exercise. With RSUs for example, the default behaviour is a portion of your stock is instantly sold to pay the tax and if you want to you can override this and pay the tax through other means. But with Stock Options in a company that is not yet traded you aren't able to do that. The government is unwilling to take shares as well. Instead you pay AMT based on a fictional VC valuation. This means a software engineer who started early at a company and got a 1% stock package in a company that grows to $100 million can only exercise their stock options if they pay taxes on the $1 million in stock. That's a crazy expense that isn't in any way fair or reasonable, and can lead to people forfeiting their stock options entirely since the stock itself pays for $0 of this expense.

s: I'm sure the left is happy with the outcome that engineers in the top 5% of incomes forfeit a bunch of money to investors in the top 0.01% of incomes. /s