Guides
Alternative Minimum Tax (AMT): How It Works in 2026
The alternative minimum tax is a parallel tax system that recalculates your income with fewer deductions, then makes you pay the higher of that result or your regular tax. For 2026, the AMT exemption is $90,100 for single filers and $140,200 for married couples filing jointly, and a new 50% exemption phaseout (up from 25%) begins at $500,000 and $1,000,000 of AMT income. You compute it on Form 6251 and pay whichever number is larger.
The One Big Beautiful Bill Act (OBBBA), signed in July 2025, kept the higher exemption amounts permanent but tightened the phaseout starting in 2026. More high earners, especially people exercising incentive stock options or claiming large state and local tax deductions, can owe AMT than in recent years.
How the alternative minimum tax works
The AMT is a second tax calculation that runs alongside your regular return. You start with regular taxable income, add back certain deductions and preference items to reach alternative minimum taxable income (AMTI), subtract the AMT exemption, and apply a 26% or 28% rate. If the result (the tentative minimum tax) exceeds your regular tax, the difference is your AMT.
The system exists because Congress wanted taxpayers who use many deductions and preferences to still pay a baseline amount. It disallows or reduces breaks the regular system allows, so income that escaped regular tax gets pulled back into the base.
You never pay both taxes in full. You pay your regular tax, and if the tentative minimum tax is higher, you add the difference on Form 1040. In practice, AMT is the amount by which the parallel calculation exceeds what you already owe.
2026 AMT exemption and phaseout
For 2026, the AMT exemption is $90,100 (single and head of household), $140,200 (married filing jointly and surviving spouse), and $70,100 (married filing separately). The exemption shrinks by 50 cents for every dollar of AMTI above $500,000 (single) or $1,000,000 (married filing jointly), a rate that doubled from 25% under OBBBA.
The phaseout is what pulls upper-middle and high earners into AMT. As income rises past the threshold, the exemption disappears, so more of your AMTI is taxed at 26% or 28%.
| 2026 AMT parameter | Single / HOH | Married filing jointly | Married filing separately |
|---|---|---|---|
| Exemption amount | $90,100 | $140,200 | $70,100 |
| Phaseout begins (AMTI) | $500,000 | $1,000,000 | $500,000 |
| Phaseout rate | 50% | 50% | 50% |
| Exemption fully gone (approx. AMTI) | $680,200 | $1,280,400 | $640,200 |
| 28% rate starts above (AMTI over exemption) | $244,500 | $244,500 | $122,250 |
A married couple filing jointly in 2026 loses the entire $140,200 exemption by roughly $1.28 million of AMTI, compared with about $1.8 million under the prior 25% phaseout. That compression is the single largest 2026 change and the reason projections show a larger AMT population.
The 26% and 28% AMT rates
The AMT uses two flat rates instead of the regular progressive brackets. After subtracting the exemption, the first slice of AMTI is taxed at 26% and the excess at 28%. For 2026, the 28% rate applies to AMTI above the exemption that exceeds $244,500 ($122,250 for married filing separately).
Because there are only two rates and a large exemption, many taxpayers with moderate income never trigger AMT. The rates bite when deductions that AMT disallows push AMTI well above regular taxable income.
The 28% top AMT rate can sit below a taxpayer’s top regular rate (up to 37%). AMT still applies when the disallowed deductions in the parallel system are large enough that a 26% to 28% rate on a broader base exceeds the regular tax on a narrower one.
Common AMT triggers
The most common triggers in 2026 are exercising incentive stock options (ISOs) without selling, large state and local tax (SALT) deductions, and other preference items like private activity bond interest. AMT adds these back to income, so taxpayers with big deductions or paper gains from options are the ones most likely to owe.
Below are the items that most often move a taxpayer into AMT.
- ISO exercise (bargain element): Exercising an incentive stock option and holding the shares creates no regular income, but the spread between the strike price and fair market value is an AMT preference item added to AMTI. A large exercise can generate AMT on income you have not yet received in cash.
- High state and local taxes (SALT): State income tax and property tax are deductible for regular tax (subject to the SALT cap) but fully added back for AMT. Taxpayers in high-tax states are disproportionately affected.
- Standard deduction and personal exemptions: The regular standard deduction is not allowed under AMT, so heavy users of it can see AMTI jump.
- Private activity bond interest: Interest on certain tax-exempt private activity bonds is taxable for AMT even though it is exempt for regular tax.
- Large miscellaneous adjustments: Depreciation timing differences, certain passive activity items, and exercised options combine on Form 6251 to lift AMTI.
State and local tax deductions became a more prominent trigger after OBBBA raised the regular SALT cap, since a larger regular deduction means a larger AMT addback. The interaction is worth modeling, and our guide to choosing between the standard and itemized deduction explains which deductions carry through to the AMT base.
Form 6251: reporting the AMT
Form 6251, Alternative Minimum Tax, Individuals, is where you compute AMTI, apply the exemption and phaseout, and determine the tentative minimum tax. You file it with Form 1040 when your income, preference items, or certain credits require it, and the IRS instructions include a worksheet that tells you whether the form is needed.
Part I builds AMTI from your Form 1040 taxable income by adding back disallowed items. Part II applies the exemption, the phaseout, and the 26%/28% rates to reach tentative minimum tax. Part III handles capital gains that keep their preferential rates inside the AMT.
If you exercise ISOs, AMT paid on the bargain element can generate a minimum tax credit in later years, tracked on Form 8801. That credit can offset regular tax in a year when regular tax exceeds tentative minimum tax, recovering some of the earlier AMT.
OBBBA changes to the AMT for 2026
The One Big Beautiful Bill Act, enacted in July 2025 (section 70107), made the higher AMT exemption amounts permanent but reset the phaseout thresholds to 2018 levels ($500,000 single, $1,000,000 joint) and doubled the phaseout rate from 25% to 50%, effective for tax years beginning in 2026. The result is a narrower path through the exemption for high earners.
Before OBBBA, the Tax Cuts and Jobs Act phaseout thresholds had climbed with inflation to roughly $626,350 (single) and $1,252,700 (joint) for 2025, with a 25% phaseout rate. Resetting to lower thresholds and a faster rate means the exemption vanishes at a lower income level.
The net effect: exemption amounts are protected for most taxpayers, but the group that loses the exemption, largely people over $500,000 (single) or $1,000,000 (joint) in AMTI, faces a steeper climb. If you plan large ISO exercises or capital events, the timing math changed for 2026. Our overview of the 2026 federal income tax brackets and rates shows how the regular system compares.
Worked example: AMT on an ISO exercise in 2026
Consider a single taxpayer in 2026 with $300,000 of regular taxable income who exercises ISOs with a $400,000 bargain element and holds the shares. Their AMTI is $700,000. Because AMTI exceeds the $500,000 phaseout threshold by $200,000, the $90,100 exemption is reduced by 50% of that excess, or $100,000, which wipes out the full exemption.
Here is the calculation step by step.
- Regular taxable income: $300,000.
- Add ISO bargain element (AMT preference): +$400,000, giving AMTI of $700,000.
- Compute the exemption phaseout: AMTI of $700,000 is $200,000 over the $500,000 threshold. At 50%, the reduction is $100,000, which exceeds the $90,100 exemption. Exemption available: $0.
- AMT base: $700,000 minus $0 exemption = $700,000.
- Apply the rates: 26% on the first $244,500 = $63,570. 28% on the remaining $455,500 = $127,540. Tentative minimum tax = $191,110.
- Compare to regular tax: assume regular tax on $300,000 is about $72,000. Because tentative minimum tax ($191,110) exceeds regular tax, the taxpayer owes roughly $119,110 in AMT on top of regular tax.
The AMT here is driven almost entirely by the ISO bargain element, income the taxpayer has not sold and may not have as cash. Some or all of the AMT paid becomes a minimum tax credit usable in future years, but the cash squeeze in the exercise year is real. Modeling the exercise size against the phaseout can keep AMTI under the threshold. For equity compensation planning, our explainer on the Section 83(b) election covers a related timing decision for founder and restricted stock.
Frequently asked questions
Who has to pay the alternative minimum tax in 2026?
Taxpayers whose tentative minimum tax on Form 6251 exceeds their regular tax owe AMT. In 2026, that group skews toward people with large ISO exercises, high state and local taxes, private activity bond interest, or AMTI above the $500,000 (single) or $1,000,000 (joint) phaseout thresholds. Most taxpayers below those levels with ordinary income are unaffected.
What is the AMT exemption for 2026?
For 2026, the AMT exemption is $90,100 for single and head of household filers, $140,200 for married filing jointly, and $70,100 for married filing separately. The exemption phases out at 50 cents per dollar of AMTI above $500,000 (single) or $1,000,000 (joint), so it disappears entirely at roughly $680,200 and $1,280,400 of AMTI respectively.
What are the AMT tax rates?
The AMT applies two rates. After subtracting the exemption, AMTI is taxed at 26% up to $244,500 ($122,250 for married filing separately) and at 28% above that. These flat rates replace the regular progressive brackets inside the AMT calculation, and long-term capital gains generally keep their preferential rates through Part III of Form 6251.
How do incentive stock options trigger AMT?
Exercising an ISO and holding the shares creates no regular taxable income, but the spread between the strike price and fair market value (the bargain element) is an AMT preference item added to AMTI. A large exercise can push AMTI over the phaseout threshold and generate AMT on gains you have not sold. AMT paid may return later as a minimum tax credit on Form 8801.
What changed for AMT under OBBBA?
The One Big Beautiful Bill Act (section 70107), enacted in July 2025, made the higher exemption amounts permanent but reset the phaseout thresholds to $500,000 (single) and $1,000,000 (joint) and doubled the phaseout rate from 25% to 50%, effective in 2026. Exemption levels are protected, but high earners lose the exemption faster than under prior law.
What form do I use to calculate the AMT?
You use IRS Form 6251, Alternative Minimum Tax, Individuals, filed with Form 1040. It computes AMTI, applies the exemption and phaseout, and sets tentative minimum tax at the 26%/28% rates. If you paid AMT because of ISOs or other timing items, Form 8801 tracks the minimum tax credit you may claim in future years.
Is the AMT the same as the regular income tax?
No. The AMT is a parallel system that disallows deductions the regular tax allows (such as SALT and the standard deduction), adds back preference items like the ISO bargain element, and applies flat 26%/28% rates against a larger base. You pay the higher of your regular tax or the tentative minimum tax, never both in full.
Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.