Preferences and Adjustments
Positive and negative AMT adjustments are added or subtracted from regular taxable income to determine the "taxable income after AMT adjustments." Tax preference items are then added to get your AMTI. The following is a list of AMT adjustments:
Adjustments for AMT (deductions not allowed):
- Standard deduction and personal exemptions
- Certain itemized deductions
- Mortgage interest
- Medical expenses
- Miscellaneous deductions
- Investment interest
- MACRS depreciation
- Basis adjustment affects AMT gain or loss
- Incentive stock options (ISO)
- Mining exploration and development costs
- Circulation costs
- Long-term contracts
- Research and experimental procedures
- Passive tax-shelter farm losses
- Passive losses from non-farming activities
Certain tax preference items must be added back into taxable income after AMT adjustments to determine the AMTI. These primary items include the following:
AMT Preference Items (Must Know These):
- Tax-exempt interest on private-activity municipal bonds
- Percentage Depletion / Excess intangible drilling costs (IDC)
- Depreciation (ACRS/MACRS)
- Exercise of an Incentive Stock Option (Bargain Element)
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