Alternative Minimum Tax (AMT) Rules and Exclusions for 2026

The alternative minimum tax (AMT) is a tax calculation that ensures that high-income earners pay at least a minimum amount, even if they claim many deductions or credits. In 2026, the AMT exemption is $90,100 for single filers and $140,200 for married couples filing jointly. These amounts begin to phase out if income exceeds $500,000 for singles or $1,000,000 for joint filers. 

A financial advisor can help you determine if the AMT affects you so you can plan for it.

About Alternative Minimum Tax (AMT)

The alternative minimum tax operates as a separate tax framework that limits the use of deductions and credits by high-income taxpayers to significantly lower their tax obligations. This was introduced in 1969 in response to concerns that some wealthy individuals were paying little to no federal income tax.

The regular tax system allows various deductions and exemptions. AMT, on the other hand, recalculates taxable income by adding back certain tax preferences, such as state and local tax (SALT) deductions and particular business net operating losses.

AMT applies only if the recalculated tax liability exceeds what a taxpayer would owe under the standard tax system. If so, the taxpayer must pay the higher amount. This system primarily affects individuals with high incomes, large capital gains or substantial deductions.

To adjust for inflation, AMT includes an exemption amount, which phases out at higher income levels. While fewer taxpayers are subject to AMT today due to automatic inflation adjustments, it still impacts those with complex financial situations.

What Are the AMT Tax Brackets?

AMT uses a separate set of tax brackets from the regular income tax system. 

Instead of progressive marginal rates that increase with income, AMT applies only two tax rates: 26% and 28%. The first $244,500 of taxable AMT income ($122,250 for married couples filing separately) is taxed at 26%, while any amount above either of those amounts is taxed at 28%.

This separate tax system also includes exemption amounts, which reduce the portion of income subject to the tax. For 2026, the exemption is $140,200 for married couples filing jointly and $90,100 for single filers. 

However, the exemption begins to decrease once a taxpayer’s alternative minimum taxable income (AMTI) exceeds a specific inflation-adjusted threshold. The exemption is completely eliminated once AMTI hits a secondary threshold, which is also subject to annual inflation adjustments.

Since AMT calculations remove certain deductions allowed under the standard tax system, taxpayers must determine whether their adjusted income pushes them into this separate tax structure.

How AMT Exemption Phaseouts Work

The alternative minimum tax exemption reduces the portion of income subject to AMT, but this benefit phases out at higher income levels. 

For 2026, the exemption begins to decrease once a taxpayer’s AMTI surpasses a specific threshold: $1,000,000 for married couples filing jointly and $500,000 for single filers. The phaseout mechanism reduces the exemption by 50 cents for every dollar of AMTI above these thresholds.

If AMTI reaches the complete phaseout threshold, $1,280,400 for joint filers and $680,200 for single taxpayers, the exemption is eliminated entirely, meaning all AMTI is subject to AMT rates. This phaseout structure significantly increases AMT liability for high earners, subjecting more income to the 26% and 28% AMT rates. It makes tax planning an important consideration for those near or above the phaseout range.

For example, a single filer with an AMTI of $1 million exceeds the $680,200 phaseout threshold by $319,800. The exemption is reduced by 25% of that amount, or $79,950. Since the full exemption for single filers is $90,100, this reduction eliminates the exemption entirely, meaning the taxpayer’s entire AMTI is subject to AMT rates.

Now imagine a second single filer with an AMTI of $800,000. Since their AMTI exceeds the $680,200 threshold by $119,800, their exemption is reduced by 25% of that amount, or $29,950, leaving a final exemption of $60,150 ($90,100 – $29,950). 

While some exemption remains, a significant portion of income is still subject to AMT rates, demonstrating how the phaseout gradually increases taxable AMTI.

Calculating Your AMT

AMT liability is determined by applying AMT tax rates to AMTI after adjusting for the exemption. Once the exemption is reduced or eliminated based on income, the remaining taxable AMTI is subject to either the 26% or 28% tax rate.

For a hypothetical single filer with $1 million in AMTI, the exemption is completely phased out. The first $244,500 of taxable AMTI is taxed at 26%, resulting in $63,570 in tax. The remaining $936,430 is taxed at 28%, adding $262,200.40 in tax. The total tentative AMT is $325,770.40. If this amount exceeds the taxpayer’s regular income tax, the difference must be paid as AMT.

For the single filer with $800,000 in AMTI, the reduced exemption of $119,800 is subtracted, leaving a taxable AMTI of $680,200. The first $244,500 is taxed at 26% ($63,570), and the remaining $435,700 is taxed at 28% ($121,996), totaling $185,566 in tentative AMT. 

Again, comparing this amount to the regular tax liability determines whether additional AMT applies.

Common AMT Triggers to Watch for in 2026

Certain types of income and transactions are more likely to push taxpayers into the alternative minimum tax. 

Large capital gains, particularly from the sale of concentrated stock positions or real estate, can increase alternative minimum taxable income and reduce or eliminate the AMT exemption. Even one-time transactions can have an outsized impact in a single tax year.

Equity compensation is another frequent trigger. Exercising incentive stock options (ISOs) increases AMTI even though the income is not immediately taxable under the regular tax system. If a significant number of options are exercised in one year, the added AMTI can create AMT liability, even if the shares are not sold.

State and local tax (SALT) payments can also contribute to AMT exposure. While SALT deductions are limited under the regular tax system, they are generally not allowed at all under AMT. Taxpayers in high-tax states who pay substantial property or income taxes may find that these amounts increase the likelihood that the AMT applies.

Timing differences matter, as well. Year-end bonuses, deferred compensation payouts or the acceleration of deductions can change AMTI in ways that trigger AMT. Managing the timing of income and transactions can affect whether AMT applies in a given year, particularly for taxpayers near the exemption phaseout range.

Bottom Line

The alternative minimum tax (AMT) is a separate tax rule that some high-income earners must follow. It takes away some deductions while using different tax rates. Fewer people owe AMT now because of inflation adjustments, but it can still affect those with large deductions, capital gains or stock options. If your income is high, your AMT exemption may shrink, potentially increasing your taxes in turn.

Tax Planning Tips

• If you want to lower your tax liability, a financial advisor can work with you to optimize your portfolio. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• SmartAsset’s tax return calculator with updated tax brackets and rates can help you estimate how much your next tax refund or balance could be.

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