OBBB AMT Exemption Calculator 2026

How AMT Works After OBBB

The Alternative Minimum Tax is a parallel tax system that recomputes income without certain deductions (state and local taxes, miscellaneous itemized, depreciation acceleration, ISO bargain element) and applies a flat 26%/28% rate to the excess over an exemption. The One Big Beautiful Bill Act made the TCJA-era AMT relief permanent — preserving the higher exemption and phase-out thresholds that dramatically reduced AMT exposure for middle-class filers. For 2026 (estimated, IRS-confirmed by November 2025 announcement), the exemption is approximately $88,100 (single) and $137,000 (married filing jointly). Phase-out begins at $626,350 (single) and $1,252,700 (MFJ), reducing the exemption by $1 for every $4 of AMTI above the threshold. The 26% rate applies up to $239,100 of AMT income above exemption; 28% above. Source: IRS Form 6251 (Alternative Minimum Tax).

Common AMT Triggers

The most frequent AMT triggers in 2026 are: (1) Large ISO exercise bargain element held across year-end — taxed at 26-28% on Form 6251. (2) Very large state income tax + property tax in high-tax states like California or New York — these are deductible for regular tax (subject to $10K SALT cap) but fully disallowed for AMT. (3) Private activity bond interest received from tax-exempt municipal bonds — taxed for AMT but not regular tax. (4) Net operating loss carryforwards computed differently for AMT. (5) Depreciation differences between regular tax and AMT for assets placed in service before 1999. With the post-TCJA SALT cap and the OBBB-preserved higher AMT exemption, only ~0.1% of filers owe AMT in 2026 — versus ~5 million households before TCJA. ISO exercise remains the single largest AMT-triggering event for technology workers. Source: IRS Form 6251 Instructions.

AMT Credit Recovery in Later Years

AMT paid in prior years generates a Minimum Tax Credit (MTC) tracked on Form 8801. The credit can offset regular tax in future years to the extent your regular tax exceeds your AMT for that year. The MTC is non-refundable but carries forward indefinitely. For an ISO exercise that triggered $50,000 of AMT in 2025, you accumulate a $50,000 MTC; selling the shares in a qualifying disposition in 2027 generates regular-tax LTCG that exceeds AMT, allowing you to recover some or all of the MTC against the regular tax liability. Track AMT cost basis (FMV at exercise) separately from regular-tax basis (strike price) on Form 6251 line 2k. Source: IRS Form 8801 (Minimum Tax Credit).

AMT Planning Tactics

To minimize AMT in 2026: (1) Exercise ISOs early in the year and consider same-day or before-year-end sale if AMT would be triggered — converts to ordinary income but avoids AMT timing trap. (2) Time deduction acceleration carefully — large miscellaneous itemized deductions and state tax prepayments are AMT-disfavored. (3) Avoid private activity bonds (AMT-taxable) and prefer "AMT-free" municipals if subject to AMT. (4) Bunch deductions in alternating years using Donor Advised Funds to clear the standard-deduction hurdle in itemizing years. (5) For ISO holders facing AMT, exercise an amount per year that exactly fills the AMT exemption — this maximizes long-term capital gains conversion without triggering AMT. See our ISO AMT Calculator for a multi-year strategy. Last updated May 2026.