Taxes

What is AMT?

The AMT is a separate tax system that limits certain deductions to make sure higher-income taxpayers pay a minimum amount. Taxpayers must calculate their tax liability under both the regular income tax rules and the AMT rules, and pay whichever amount is higher. The AMT uses a different set of rules to calculate taxable income, adding back certain deductions.

The AMT features its own exemption amounts and phase-out thresholds, which are adjusted annually for inflation to protect middle-class taxpayers. For the 2026 tax year, the AMT exemption is $90,100 for single filers and $140,200 for married couples filing jointly (up from $88,100 and $137,000 in 2025 respectively). The exemption begins to phase out once income exceeds $621,450 for single filers and $1,242,900 for married couples filing jointly in 2026.

Deductions disallowed under the AMT include the state and local tax (SALT) deduction, medical deductions below the AMT threshold, and incentive stock option (ISO) paper profits. ISO exercises are a common trigger for the AMT, requiring careful planning.

Quick Facts

Official NameAlternative Minimum Tax (AMT)

Exemption Single (2026)$90,100 exemption amount ($88,100 in 2025)

Exemption Joint (2026)$140,200 exemption amount ($137,000 in 2025)

Common TriggersHigh SALT deductions, ISO stock exercises, and private activity bond interest

PRACTICAL EXAMPLE

A married couple filing jointly in 2026 has a regular tax liability of $45,000. Due to a major exercise of Incentive Stock Options (ISOs), their calculated AMT liability is $55,000. Under federal tax law, they must pay the higher AMT amount of $55,000.

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Taxable incomeThe portion of an individual's gross income that is subject to federal income tax after all deductions are applied.

Tax bracketThe range of taxable income levels subject to a specific tax rate under the progressive federal income tax system.

Standard deductionA flat dollar amount that reduces taxable income, which taxpayers can claim without itemizing individual expenses.

Itemized deductionsAllowable individual expenses that taxpayers list on Schedule A to reduce their Adjusted Gross Income.

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