The short answer
The alternative minimum tax (AMT) is a second way of figuring tax that limits how much certain tax benefits can reduce your bill. You figure it on Form 6251. You pay AMT only if your tentative minimum tax is higher than your regular tax. For 2026, final IRS figures make the exemption phase out at lower incomes and twice as fast as in 2025, so more high-income taxpayers may owe AMT.
How the AMT is figured
| Step | What happens | Form 6251 |
|---|---|---|
| 1. Start with taxable income | Begin with taxable income from your return (line 1 is split into 1a and 1b starting with 2025) | Line 1 |
| 2. Add adjustments and preferences | Add back items the AMT does not allow, such as state and local taxes or the standard deduction, and the ISO spread | Lines 2a–3 |
| 3. Alternative minimum taxable income (AMTI) | The result | Line 4 |
| 4. Subtract the exemption | Reduced or eliminated at higher AMTI (the phase-out) | Line 5 |
| 5. Apply 26% and 28% rates | 26% up to the 28% threshold; 28% above it (capital gains keep their lower rates) | Line 7 |
| 6. Compare with regular tax | AMT is the tentative minimum tax minus your regular tax, if more than zero | Lines 9–11 |
Common adjustments and preference items
- Taxes (line 2a): state and local income, sales, and property taxes deducted on Schedule A are added back. If you take the standard deduction, it is added back instead.
- Incentive stock options (line 2i): the spread at exercise is generally included for the AMT if you keep the shares past the end of the year. If you sell in the same year, no adjustment is needed.
- Enhanced deduction for seniors (2025): the 2025 Instructions for Form 6251 say this new deduction is treated as a personal exemption and added back for the AMT (handled on lines 1a–1b).
- Others include certain tax-exempt private activity bond interest, depreciation differences, and the different AMT treatment of net operating losses and passive activities.
2025 and 2026 figures
| Item | 2025 (Rev. Proc. 2024-40) | 2026 (Rev. Proc. 2025-32) |
|---|---|---|
| Exemption — married filing jointly or qualifying surviving spouse | $137,000 | $140,200 |
| Exemption — unmarried individuals | $88,100 | $90,100 |
| Exemption — married filing separately | $68,500 | $70,100 |
| Phase-out begins — joint / unmarried / separate | $1,252,700 / $626,350 / $626,350 | $1,000,000 / $500,000 / $500,000 |
| Exemption fully phased out — joint / unmarried / separate | $1,800,700 / $978,750 / $900,350 | $1,280,400 / $680,200 / $640,200 |
| Phase-out rate | 25% of AMTI over the threshold (2025 Form 6251 instructions) | 50% of AMTI over the threshold (calculated below) |
| 28% rate applies to taxable excess over | $239,100 ($119,550 if married filing separately) | $244,500 ($122,250 if married filing separately) |
Where the 2026 50% phase-out rate comes from
Rev. Proc. 2025-32 gives both the threshold and the complete phase-out amount for 2026. The exemption disappears over a band of AMTI equal to exactly twice the exemption, which means it shrinks by 50 cents for each dollar over the threshold:
- Joint: $1,280,400 − $1,000,000 = $280,400 = 2 × $140,200.
- Unmarried: $680,200 − $500,000 = $180,200 = 2 × $90,100.
- Separate: $640,200 − $500,000 = $140,200 = 2 × $70,100.
For 2025, the same check gives a 25% rate: $1,800,700 − $1,252,700 = $548,000 = 4 × $137,000, matching the 25% in the 2025 Exemption Worksheet. Do not confuse the phase-out rate with the 26% and 28% AMT tax rates — they are different things. Rev. Proc. 2025-32 also says the 2025 tax law (Public Law 119-21) made permanent the increased exemption and phase-out threshold amounts that first applied for 2018 through 2025 and that the $1,000,000 amount is not adjusted for inflation for years beginning before 2027.
2026 Form 6251 is still a draft
An IRS draft of the 2026 Form 6251 (created May 26, 2026) shows the new line 5 thresholds ($500,000 and $1,000,000) and the 2026 28% bracket ($244,500, with $4,890 subtracted). Drafts are not for filing and can change before the final form is released. When this guide was reviewed in October 2026, the IRS had not yet published 2026 Instructions for Form 6251, in draft or final form; the 50% phase-out rate above comes from the final Rev. Proc. 2025-32 amounts, not from those instructions.
Examples (simplified)
| Priya (single, 2025) | Priya (single, 2026) | Tom and Ana (joint, 2026) | |
|---|---|---|---|
| AMTI | $600,000 | $600,000 | $1,100,000 |
| Exemption | $88,100 — below the $626,350 threshold, no phase-out | $90,100 − 50% × ($600,000 − $500,000) = $40,100 | $140,200 − 50% × ($1,100,000 − $1,000,000) = $90,200 |
| Taxable excess | $511,900 | $559,900 | $1,009,800 |
| Tentative minimum tax | $511,900 × 28% − $4,782 = $138,550 | $559,900 × 28% − $4,890 = $151,882 | $1,009,800 × 28% − $4,890 = $277,854 |
| AMT | Owed only if $138,550 is more than regular tax | Owed only if $151,882 is more than regular tax | Owed only if $277,854 is more than regular tax |
The examples assume no capital gains, qualified dividends, or AMT foreign tax credit, and they do not compute regular tax. With the same $600,000 of AMTI, Priya's exemption falls by $48,000 from 2025 to 2026 because of the lower threshold and faster phase-out.
The AMT credit: Form 8801
- Deferral items only: AMT caused by deferral items, such as ISO exercises and depreciation, can create a credit for later years. AMT caused by exclusion items — certain itemized deductions such as taxes, the standard deduction, certain tax-exempt interest, depletion, and the section 1202 exclusion — does not.
- Limit: the credit you can use each year is limited to your regular tax (after certain credits) minus your tentative minimum tax. Unused credit carries forward.
- Timing: AMT paid for 2025 can generate a credit on the 2026 Form 8801.
Who should check
- Employees who exercised ISOs and held the shares past year-end.
- Taxpayers with AMTI above the 2026 thresholds, especially unmarried filers above $500,000.
- People with large itemized deductions for state and local taxes.
- Parents of a child subject to the kiddie tax: the child's AMT exemption is limited to earned income plus $9,550 for 2025 or $9,750 for 2026.
An ISO exercise can create a large AMT bill even though you received no cash. Before exercising, model the AMT for the year with tax software or a tax professional, and keep records of your regular and AMT basis in the shares.