Alternative Minimum Tax - Exclusion Items Vs. Deferral Items
Exclusion Items Vs. Deferral Items
Tax preference and adjustments to AMT are broken down into two categories: "exclusion items" and "deferral items." In the previous paragraph, we listed the specific tax items that pertain to tax preference and adjustments.
Exclusion items are adjustments that cause a permanent difference in income for regular tax versus AMT purposes, they include the following: AMT adjustments/preferences that are "exclusion items"
- Personal exemption
- Standard deduction
- Itemized deduction
- Percentage depletion
- Tax-exempt interest
- Exclusion of gain from qualified small business stock
Deferral items do not cause a permanent difference in taxable income over time. All adjustments except "exclusion items:"
AMT adjustments/preference that are "deferral items"
Any adjustment/preference item that is not an exclusion item from the list above
The exclusion and deferral items are used in the minimum tax credit calculation which we'll discuss next.