CFP

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.


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