Alternative Minimum Tax - Preferences and Adjustments

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):

  1. Standard deduction and personal exemptions
  2. Certain itemized deductions
  3. Mortgage interest
  4. Taxes
  5. Medical expenses
  6. Miscellaneous deductions
  7. Investment interest
  8. MACRS depreciation
  9. Basis adjustment affects AMT gain or loss
  10. Incentive stock options (ISO)
  11. Mining exploration and development costs
  12. Circulation costs
  13. Long-term contracts
  14. Research and experimental procedures
  15. Passive tax-shelter farm losses
  16. 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):
  1. Tax-exempt interest on private-activity municipal bonds
  2. Percentage Depletion / Excess intangible drilling costs (IDC)
  3. Depreciation (ACRS/MACRS)
  4. Exercise of an Incentive Stock Option (Bargain Element)
Exclusion Items Vs. Deferral Items
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