AMT Exemptions & Thresholds
2025/2026 Alternative Minimum Tax exemptions, phaseout thresholds, rates, and planning strategies for the OBBBA changes
Key Numbers
Single Exemption
$90,100
MFJ Exemption
$140,200
Phaseout Rate
50%
AMT Rates
26% / 28%
The Alternative Minimum Tax (AMT) is a parallel tax system that limits certain deductions and credits for higher-income taxpayers. Most taxpayers never owe AMT — it primarily affects those with AMTI above $500,000 (single) or $1,000,000 (joint) in 2026, or anyone exercising incentive stock options. The OBBBA preserved higher exemptions but made the phaseout faster (50% vs. 25%) and at lower thresholds starting in 2026, significantly expanding AMT exposure.
2026 change: The phaseout threshold drops significantly and the phaseout rate doubles to 50%. More high earners will owe AMT even if they didn't before.
How AMT Works
1. Calculate AMTI — Start with regular taxable income and add back disallowed deductions (SALT, standard deduction, certain itemized deductions) plus AMT preference items (ISO bargain element, private activity bond interest). 2. Subtract Exemption — Apply the AMT exemption amount, which phases out for income above the thresholds. 3. Compare — Apply AMT rates (26%/28%) to get the tentative minimum tax. You pay the higher of regular tax or AMT.
Common AMT Triggers
| Trigger | Why It Matters |
|---|---|
| Incentive Stock Options (ISOs) | Bargain element at exercise is an AMT preference item |
| High State/Local Taxes | Entire SALT deduction is disallowed for AMT |
| Large Capital Gains | Can push total income into the AMT phaseout range |
| Private Activity Bond Interest | Tax-exempt for regular tax but taxable for AMT |
| Standard Deduction | Not allowed for AMT purposes |
| Large Deferred Compensation | Lump-sum payouts can push income into phaseout range |
Exemptions & Phaseouts
The AMT exemption shields a portion of income from AMT. In 2026, exemptions rise slightly with inflation, but the phaseout begins at much lower income and erodes the exemption twice as fast.
2025 vs. 2026: Critical Changes
| Parameter | 2025 | 2026 | Impact |
|---|---|---|---|
| Single Exemption | $88,100 | $90,100 | ↑ Higher |
| MFJ Exemption | $137,000 | $140,200 | ↑ Higher |
| Single Phaseout Starts | $626,350 | $500,000 | ↓ $126K lower |
| MFJ Phaseout Starts | $1,252,700 | $1,000,000 | ↓ $253K lower |
| Phaseout Rate | 25% | 50% | 2× faster |
Complete 2026 AMT Parameters
| Filing Status | Exemption | Phaseout Begins | Exemption Gone |
|---|---|---|---|
| Single | $90,100 | $500,000 | $680,200 |
| Married Filing Jointly | $140,200 | $1,000,000 | $1,280,400 |
| Married Filing Separately | $70,100 | $500,000 | $640,200 |
| Trusts & Estates | $29,900 | $99,700 | $159,500 |
| Child under 18 | $8,800 | $29,300 | $46,900 |
Phaseout example: A married couple with $1.1M AMTI in 2026 exceeds the threshold by $100,000. At the 50% phaseout rate, their $140,200 exemption is reduced by $50,000 to $90,200. Under 2025's 25% rate, the reduction would only be $25,000.
How AMT Is Calculated
AMT uses a two-rate structure applied to AMTI minus the exemption. You pay the higher of your regular tax or tentative minimum tax.
2026 AMT Tax Rates
| Rate | Applies To (AMTI Less Exemption) |
|---|---|
| 26% | First $244,500 ($122,250 for MFS) |
| 28% | Amounts over $244,500 ($122,250 for MFS) |
Long-term capital gains and qualified dividends retain the same preferential rates (0%/15%/20%) under both regular tax and AMT.
Calculation Steps
| Step | Description |
|---|---|
| 1 | Start with regular taxable income |
| 2 | Add back AMT adjustments (standard deduction, SALT, etc.) |
| 3 | Add AMT preference items (ISOs, private activity bond interest, etc.) |
| 4 | = Alternative Minimum Taxable Income (AMTI) |
| 5 | Subtract AMT exemption (reduced if in phaseout range) |
| 6 | Apply 26%/28% AMT rates → tentative minimum tax |
| 7 | If tentative minimum tax > regular tax, pay the difference as AMT |
Deductions Disallowed for AMT
| Deduction | AMT Treatment |
|---|---|
| State & Local Taxes (SALT) | Entirely disallowed — even the $10,000 cap allowed for regular tax |
| Standard Deduction | Cannot be claimed for AMT purposes |
| Home Equity Loan Interest | Disallowed unless proceeds used to improve the home |
| Misc. Itemized Deductions | Investment expenses, tax prep fees disallowed (also suspended for regular tax) |
Planning Strategies
The 2026 changes create a “bump zone” where the phaseout generates effective marginal rates well above the stated 26%/28% AMT rates. Planning around these thresholds is critical for high earners.
Effective Rates in the Phaseout Zone
| Income Type | Stated AMT Rate | Effective Rate in Phaseout |
|---|---|---|
| Ordinary income (26% bracket) | 26% | ~39% |
| Ordinary income (28% bracket) | 28% | ~42% |
| Long-term capital gains | 20% | ~34% |
Each additional $1 of income in the phaseout range reduces the exemption by $0.50, effectively adding 50% of the AMT rate on top of the stated rate.
Key Strategies
| Strategy | How It Helps |
|---|---|
| Income timing | Accelerate income into 2025 (25% phaseout) or defer to years outside the phaseout range |
| ISO exercise spreading | Spread exercises across years to keep AMTI below phaseout thresholds |
| Maximize retirement contributions | 401(k)/403(b)/IRA contributions reduce AGI, helping keep AMTI below thresholds |
| Charitable giving timing | Charitable deductions are allowed for AMT — bunch donations into AMT-risk years |
Minimum Tax Credit (MTC)
AMT paid due to timing differences (ISOs, depreciation) generates a credit that can offset regular tax in future years. The MTC carries forward indefinitely.
Model Before Acting
AMT calculations are complex, and the 2026 changes create new planning opportunities. Run projections for both 2025 and 2026 before making significant decisions about ISO exercises, income timing, or large transactions.
This content is for educational and informational purposes only and does not constitute financial, tax, or legal advice. Consult a qualified professional for guidance tailored to your situation.