Who's most likely to owe AMT?

ISO exercisers, high earners in high-SALT states, large families w/ multiple dependents.

Does standard deduction trigger AMT?

No \u2014 standard deduction allowed for AMT post-TCJA.

Are HSA contributions added back?

No \u2014 HSA, 401(k), HRA all allowed for AMT.

ISO exercise \u2014 when does AMT hit?

When you exercise and hold (not sell same year). Spread = AMT preference item.

Can I avoid AMT by selling ISO same year?

Yes \u2014 same-year sale = no AMT, but treated as ordinary income (no LTCG).

AMT Alternative Minimum Tax 2027

AMT: 2027 exemption $86,600 single / $134,200 MFJ (TCJA extended via OBBB). Phase-out at $609K/$1.218M. 26%/28% rate above. Hit by ISO exercise, high SALT, multiple kids.

Alternative Minimum Taxable Income ($)

Filing Status

Regular Tax 1040 ($)

AMT Tax

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Additional AMT Owed

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Total Tax

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AMTI	—
AMT exemption (after phaseout)	—
AMT taxable base	—
Tentative AMT	—
Regular tax	—
AMT owed beyond regular	—
Total tax (regular + AMT)	—

The Alternative Minimum Tax (AMT) is a parallel tax system designed to ensure high-income taxpayers pay a minimum amount. Common triggers: incentive stock option (ISO) exercise, high state/local tax in low-tax states, large family size, AMT preference items.

OBBB and the 2027 AMT

The One Big Beautiful Bill Act (P.L. 119-21, July 2025) extended TCJA's higher AMT exemption ($86,600 single / $134,200 MFJ for 2027 estimated). Without this extension, exemption would have reverted to ~$71K single / $111K MFJ in 2026.

AMT Preference Items

Add back: state and local tax deduction, ISO bargain element, depletion allowance, passive activity losses, tax-exempt interest from private activity bonds. These reduce regular tax but not AMT.

AMT Exemption Phase-Out

Exemption phases out $1 for every $4 of AMTI above $609,300 single / $1.218M MFJ (2026 est). Fully phased out around $955K single / $1.755M MFJ. High earners lose the exemption entirely.

AMT Credit Carryforward

If you paid AMT due to timing differences (especially ISO exercise), you may receive a credit (Form 8801) in future years when regular tax exceeds AMT. Track this carefully to recover overpaid AMT.

Last updated May 2026. Sources: IRS AMT, Form 6251 Instructions.