Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) is a parallel tax calculation. Taxpayers pay the higher of regular tax or AMT. Most common triggers today are ISO exercises and very large state-tax deductions (the SALT cap moderated this somewhat).

The exemption

There's an AMT exemption that phases out at higher incomes. For 2026 (subject to indexing):

• Single: exemption ~$87,300, phaseout starting at $626K
• Married filing jointly: exemption ~$135,200, phaseout starting at $1.25M

Above the phaseout, the exemption shrinks dollar-for-dollar with 25% of excess AMTI.

Rates

Above the exemption, AMT runs at 26% up to ~$232K of AMTI excess and 28% beyond.

Planning

The main planning levers:

• Time ISO exercises to fit under the AMT crossover
• Time large itemized deductions to avoid AMT-only years
• Use AMT credit in future years when regular tax exceeds tentative AMT
• Coordinate income realization (Roth conversions, capital gains) with AMT exposure