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Definition of 'Tax Preference Item'
A type of income, normally tax-free, that may trigger the alternative minimum tax (AMT) for taxpayers. Tax preference items include private-activity municipal-bond interest, the qualifying exclusion for small business stock and excess intangible drilling costs for oil and gas, if this amount exceeds 40% of AMT income. Tax preference items are added to the amount of AMT income in the tax formula.
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Investopedia explains 'Tax Preference Item'
Like the AMT itself, tax preference items are designed to prevent high-income taxpayers from being able to avoid too much income tax via participation in certain activities. For example, investors who own private-activity bonds issued after August or September of 1986 must declare all income received from these bonds, minus investment expenses. This rule thereby prevents taxpayers from shielding all of their investment income in this type of bond issue.
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Search results for 'Tax Preference Item'
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http://www.investopedia.com/articles/07/oil-tax-break.asp
... Alternative Minimum Tax: All excess intangible drilling costs have been specifically
exempted as a "preference item" on the alternative minimum tax return. ...
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http://financialedge.investopedia.com/financial-edge/0212/When-You-Should-Plan-For-A-Tax-Refund.aspx
... what is right for you depends on your preference, as well ... Planning to get such a
tax refund makes sense if ... for reasons which include buying a big-ticket item. ...
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