Alternative minimum tax: 2026 exemption, rates and who pays

The alternative minimum tax in plain terms

Think of the AMT as a parallel tax return with fewer breaks. You start from regular taxable income, add back items the AMT does not allow, subtract an exemption, and apply AMT rates. If that tentative minimum tax is higher than your regular tax, the difference is your AMT and it is added to your bill.

Most people never owe it. The exemption is large, and the regular-tax changes made in 2018 and later removed several of the deductions that used to push middle-income households into AMT. It still reaches people with specific triggers, especially incentive stock option exercises, very large state and local tax deductions, or high incomes that shrink the exemption.

AMT exemption 2026 and phaseout table

The 2026 amounts come from Rev. Proc. 2025-32. They apply to the return you file in 2027.

How the AMT exemption phase out works in 2026

Above the threshold, the exemption drops by 50 cents for each dollar of AMT income. That is why an unmarried filer's $90,100 exemption is gone at $680,200: the $180,200 of income above $500,000 times 50% equals the full exemption. Before 2026 the reduction was 25 cents per dollar and the 2025 threshold was $626,350 for unmarried filers, so the 2026 rules cut the exemption faster and start sooner for some high earners.

The $500,000 and $1,000,000 thresholds are not adjusted for inflation for years before 2027. Whether they begin to move for 2027 will show up in the next inflation release, which is not yet announced; see when the 2027 tax brackets will be released.

The 26% and 28% AMT rates

After the exemption, the AMT base is taxed at 26% up to $244,500 for 2026 ($122,250 if married filing separately) and 28% above that. Long-term capital gains and qualified dividends keep their 0%, 15% and 20% rates inside the AMT calculation, so they do not get taxed at 28% just because you are in AMT.

Because the 28% threshold is the same $244,500 for single and joint filers, while the exemption is not doubled for couples, the AMT is one of the places a marriage penalty tax can show up.

Who has to pay AMT? Common triggers

The adjustments and preference items on Part I of Form 6251 are the usual suspects. The ones that most often matter for individuals:

• Incentive stock options (line 2i). Exercising ISOs and holding the shares creates an AMT adjustment equal to the spread between the exercise price and fair market value, even though no regular tax is due yet.
• State and local taxes (line 2a). Taxes you deduct on Schedule A are added back in full for AMT.
• Private activity bond interest (line 2g). Interest that is tax-free for regular tax can be taxable for AMT.
• Depletion, intangible drilling costs and depreciation differences from business or rental activity.
• No standard deduction. Anyone who takes the standard deduction adds it back when figuring AMT income.

Worked example: an ISO exercise in 2026

A single filer has $200,000 of regular taxable income after the $16,100 standard deduction and exercises ISOs with a $150,000 spread. AMT income is $200,000 plus $16,100 plus $150,000, or $366,100. That is under $500,000, so the full $90,100 exemption applies and the AMT base is $276,000.

AMT caused by timing items like ISOs can often be recovered in later years as a credit on Form 8801, Credit for Prior Year Minimum Tax. Keep the Form 6251 from the year you paid it.

Does the SALT cap affect AMT?

Indirectly, yes. The regular-tax SALT limit rose to $40,400 for 2026, reduced for incomes over $505,000 but not below $10,000, per Publication 505. The AMT still allows none of it. A larger regular-tax deduction therefore widens the gap between the two calculations, and itemizers in high-tax states who now deduct more on Schedule A should check Form 6251. Details are on our SALT deduction cap page.

Form 6251 basics

1. Start with taxable income from Form 1040, or income before the standard deduction if you did not itemize.
2. Enter adjustments and preferences in Part I, such as taxes from Schedule A and the ISO spread.
3. Subtract the exemption in Part II after applying the phaseout.
4. Apply 26% and 28%, using Part III if you have capital gains or qualified dividends.
5. Compare the tentative minimum tax with regular tax; any excess goes to Schedule 2 as AMT.

Per the Form 6251 instructions, you must attach the form when the tentative minimum tax exceeds regular tax, and in a few other cases involving certain credits. Tax software runs the calculation automatically, but it is worth reading the form if you exercised options, sold rental property or have large itemized taxes. For context on the regular side of the comparison, see federal tax brackets by year.