Investopedia

Tax Preference Item

Filed Under » ,
Dictionary Says

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.

Investopedia Says

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.

Articles Of Interest

  1. The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  2. Avoid Tricky Tax Issues On Municipal Bonds

    Learn the rules every investor should know before buying into this "tax-free" investment.
  3. Oil: A Big Investment With Big Tax Breaks

    Oil and gas investments can provide unmatched deduction potential for accredited investors.
  4. How To Cut Your Alternative Minimum Tax

    Save yourself money by lowering the amount of tax you owe.
  5. Has Income Tax Become A Class Tax On The Poor?

    With more than 33% of American families falling close to the poverty line despite their adult members holding full-time employment, a rising number of citizens are being forced to pay a rate ...
  6. Possible Effects Of The Online Retail Tax

    The U.S. Senate has passed a bill that will impose a sales tax on online retailers. Discover how the Marketplace Fairness Act could affect your bottom line.
  7. How To Get The Most Out Of Hiring An Accountant

    When you hire an accountant, getting good tax advice going forward is as valuable as – or perhaps even more valuable than - getting the previous year’s taxes filed correctly. Learn what you need ...
  8. How The 2014 Obama Budget Could Affect Your Finances

    Depending on which estimate you believe, Obama's proposed budget would raise the tax bill of a household with a yearly income of $50,000 to $75,000 between $63 and $100 per year. However, that’s ...
  9. Inaccurate Tax Return, Now What?

    If the IRS finds errors, it will cost you. Find out how to fix them, and how to prevent them in the first place.
  10. Tips To Make Next Year’s Taxes Less Stressful

    You might be ready to put the stress of tax preparation behind you until next season, but ignoring your personal tax situation for 11 months of the year is what got you into this mess. Find out ...
comments powered by Disqus
Marketplace
Hot Definitions
  1. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
  2. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.
  3. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.
  4. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.
  5. Lease To Own

    An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time.
  6. Failed Break

    A price movement through an identified level of support or resistance that does not have enough momentum to maintain its direction.
Trading Center