AMT exemption 2026 OBBBA makes $90,100 permanent

The alternative minimum tax nearly became a far bigger headache for millions of Americans in 2026. Without the One Big Beautiful Bill Act, the AMT exemption would have dropped to pre-TCJA levels, pulling hundreds of thousands of additional taxpayers into the parallel tax system. OBBBA Sec. 70107 locked in higher exemption amounts permanently and indexed them for inflation. But the law also reverted the phaseout thresholds to lower 2018 levels, meaning some high earners could face more AMT exposure than they did under the TCJA. Understanding both sides of that tradeoff matters for your 2026 planning.

OBBBA AMT exemption amounts for single and MFJ

The alternative minimum tax is a parallel calculation that prevents high-income taxpayers from using deductions and credits to eliminate their entire tax liability. You recalculate your income after adding back "preference items" and apply separate rates. If your AMT liability exceeds your regular tax, you pay the difference.

The Tax Cuts and Jobs Act of 2017 raised AMT exemption amounts and phaseout thresholds, reducing the number of affected taxpayers from roughly 5 million to about 200,000 per year. Those changes were temporary, set to expire after 2025.

OBBBA Sec. 70107 makes the TCJA-era exemption levels permanent and indexes them for inflation. For 2026, the exemption amounts are $90,100 for single filers and $140,200 for married couples filing jointly. These numbers adjust upward with inflation in future years.

Here is where the nuance matters. While the exemption amounts are now permanent, the phaseout thresholds reverted to 2018 levels under OBBBA. For 2026, phaseouts begin at $500,000 for single filers and $1,000,000 for married filing jointly. Under the TCJA, those thresholds were roughly $1,040,000 (single) and $1,570,000 (MFJ). Taxpayers with AMTI between $500,000 and $1,040,000 (single) or between $1,000,000 and $1,570,000 (MFJ) now face more AMT exposure because their exemption starts shrinking at a lower income level.

Without OBBBA, the exemption would have reverted to pre-TCJA levels of approximately $85,700 for single filers and $133,300 for married filing jointly. That rollback would have pulled millions of earners back into AMT territory, so the permanent exemption is still a net win for most taxpayers.

The AMT uses two rates. The first $244,500 of AMTI above the exemption is taxed at 26%. Income above that threshold is taxed at 28%. You can find the full details of estimated tax obligations in IRS Publication 505.

Who owes AMT in 2026 and income thresholds

The permanent exemption under OBBBA protects a wide range of taxpayers, but three groups benefit the most.

Middle- to upper-income earners with AGI between $200,000 and $500,000 are the primary beneficiaries. Before OBBBA, this income range would have been exposed to AMT under the reverted exemption amounts.

Employees and founders who exercise incentive stock options face particular AMT risk. When you exercise an ISO, the difference between the exercise price and fair market value (the "spread") is added back as an AMT preference item even though it is not taxed for regular income purposes. A large exercise can push your AMTI well above the exemption.

Taxpayers in high-tax states have historically faced AMT exposure due to large state and local tax deductions. While the SALT cap remains in effect for 2026, the permanent exemption prevents these filers from falling into AMT territory because other preference items stack on top of their limited SALT deduction.

One group should pay close attention to the lower phaseout thresholds. If your AMTI lands between $500,000 and $1,040,000 (single) or $1,000,000 and $1,570,000 (MFJ), your exemption now phases out sooner than it would have under the TCJA. The phaseout reduces your exemption by 25 cents for every dollar of AMTI above the threshold.

AMT planning mistakes that increase your tax

Exercising a large block of incentive stock options in a single tax year is one of the most common AMT triggers. The ISO spread gets added to your AMTI, and if you exercise $300,000 or more of spread value in a single year, you may owe AMT even with the higher exemption. Spreading exercises across multiple years keeps each year's AMTI lower.

Ignoring AMT preference items when making investment decisions is another error. Accelerated depreciation, percentage depletion, and intangible drilling costs in Oil and gas deduction investments reduce your regular taxable income but get added back for AMT purposes. Layering multiple preference items in one year can offset your regular tax savings with AMT liability.

Assuming the AMT does not apply to you because your income is "not that high" is a planning failure. The AMT depends on AMTI, not AGI. A taxpayer earning $250,000 who exercises $150,000 in ISO spreads has an AMTI of $400,000 before any other adjustments.

Failing to adjust estimated tax payments for AMT exposure can result in underpayment penalties. Your quarterly payments should reflect anticipated AMT liability.

How to plan for AMT in 2026 step by step

• Start by gathering your income documents and identifying any AMT preference items. This includes W-2 income, ISO exercises, investment income, and any deductions that differ between regular tax and AMT calculations.
• Calculate your regular taxable income as you normally would, applying all standard or itemized deductions and above-the-line deductions like retirement contributions.
• Then calculate your AMTI by adding back preference items. The most common add-backs include the spread on exercised ISOs, state and local tax deductions beyond AMT allowances, accelerated depreciation, and tax-exempt interest from private activity bonds.
• Compare your AMTI to the 2026 exemption for your filing status. If your AMTI is below $90,100 (single) or $140,200 (MFJ), you will not owe AMT.
• If your AMTI exceeds the exemption, subtract it to determine your AMT base. Check whether your income exceeds the phaseout threshold ($500,000 single, $1,000,000 MFJ), which reduces your exemption by $0.25 for every dollar above the threshold.
• Apply AMT rates to your AMT base. The first $244,500 is taxed at 26%, and amounts above that are taxed at 28%. If the result exceeds your regular tax liability, the difference is your AMT.
• If you identify AMT liability, consider timing adjustments: deferring ISO exercises, accelerating income, or shifting deduction timing.

How to calculate AMT on Form 6251 in 2026

Form 6251 is the IRS form used to calculate your AMT. Walking through it with your actual numbers is the most reliable way to assess exposure.

Suppose you are a single filer with regular taxable income of $280,000. You exercised ISOs with a $90,000 spread and have $12,000 in private activity bond interest. Your AMTI is $382,000.

Subtract the single filer exemption of $90,100. Your AMT base is $291,900. Apply 26% to the first $244,500 ($63,570) and 28% to the remaining $47,400 ($13,272). Your tentative minimum tax is $76,842.

If your regular tax liability on $280,000 is roughly $60,000, you owe approximately $16,842 in AMT.

Without OBBBA, the reverted exemption of $85,700 would have produced a higher AMT base and roughly $77,938 in tentative minimum tax. For taxpayers closer to the exemption threshold, the $4,400 difference can mean the difference between owing AMT and not owing AMT.

Real-world example

Dana is a software engineer in Austin earning $320,000 in salary. In March 2026, she exercised 10,000 ISOs with a strike price of $5 and a current fair market value of $22. The spread on her exercise is $170,000.

Dana's regular taxable income after deductions is approximately $295,000. The ISO exercise has no immediate impact on regular income tax.

For AMT purposes, the $170,000 spread is added to her income. Her AMTI is $465,000. After subtracting the $90,100 exemption, her AMT base is $374,900. At 26% on the first $244,500 ($63,570) and 28% on the remaining $130,400 ($36,512), her tentative minimum tax is $100,082. Her regular tax on $295,000 is approximately $63,500. Dana owes $36,582 in AMT.

Because Dana's AMTI of $465,000 is below the $500,000 phaseout threshold, her full exemption is intact. Under the pre-OBBBA exemption of $85,700, her tentative minimum tax would have been roughly $101,682, resulting in about $38,182 in AMT. OBBBA saved Dana approximately $1,600.

Dana could have reduced her exposure by contributing the maximum $24,500 to a Traditional 401k, lowering her AMTI by that amount and saving roughly $6,860 at the 28% rate. Splitting her ISO exercise across 2026 and 2027 would also keep each year's AMTI closer to the exemption.

For taxpayers aged 65 and older, the OBBBA $6,000 senior deduction creates an additional MAGI management opportunity that pairs directly with AMT planning—see our guide to the OBBBA senior deduction for age 65 and older.

Your compliance roadmap

January through March is the time to project your annual income and identify planned ISO exercises, investment sales, or other AMT preference events. Run a preliminary Form 6251 calculation using projected numbers.

In April, file your prior-year return and check whether you previously owed AMT. If so, you may have an AMT credit carryforward. Verify that your Q1 estimated payment accounts for anticipated AMT liability.

Mid-year, reassess if your income or preference items have changed. Adjust Q2 and Q3 estimated payments to avoid underpayment penalties.

By October, run a final projection and make timing decisions about ISO exercises, gains, or retirement contributions. Check State Tax Deadlines for state-specific AMT or filing requirements.

December is your last opportunity for tax-loss harvesting, charitable giving, and retirement contributions that affect both regular tax and AMT.

Filing your return

When you file your 2026 return, complete Form 6251 alongside your standard Form 1040. Most tax software handles this automatically, but understanding the inputs helps you verify the output.

Report all AMT preference items accurately. The most commonly missed items are private activity bond interest, which may not appear on brokerage statements, and the ISO spread, which appears on Form 3921 from your employer.

If you owe AMT, the amount is added to your Form 1040. Keep records of your AMT payments because Form 8801 allows you to recover AMT paid on "deferral items" such as ISO exercises when the timing difference reverses. When Dana eventually sells her shares, she can claim a credit for the AMT she previously paid on the spread.

If your calculation involves multiple preference items, working with a tax professional who has AMT experience is worth the cost.

401k HSA and ISO strategies to reduce AMT

Reducing your AGI is one of the most direct ways to lower your AMTI, since most AGI-reducing strategies also reduce your alternative minimum taxable income.

A Traditional 401k contribution is the simplest tool. The 2026 limit of $24,500 ($32,500 if you are 50 or older) reduces your AGI dollar-for-dollar, resulting in a lower AMTI at the 26% AMT rate, saving $6,110.

A Health savings account contribution also reduces AGI while providing tax-free growth and withdrawals for medical expenses. The 2026 limit is $4,400 for individual coverage and $8,750 for family coverage.

If you are weighing a Roth 401k against a Traditional 401k, keep in mind that Roth contributions do not reduce your AGI or AMTI. For taxpayers facing AMT exposure, the Traditional 401k provides more immediate benefit.

Investors in Oil and gas deduction ventures should pay close attention to how intangible drilling costs interact with the AMT. IDCs are deductible for regular tax purposes but are treated as an AMT preference item. If you are already near the threshold, the regular tax benefit may be offset by increased AMT liability.

Charitable giving through donor-advised funds reduces both regular taxable income and AMTI. Bunching contributions into a single year helps clear the standard deduction threshold while reducing AMT exposure.

Keep your AMT exposure low with the right planning moves

The permanent AMT exemption under OBBBA Sec. 70107 gives high-income filers more headroom, but the exemption still phases out at $500,000 for single filers and $1,000,000 for MFJ. ISO exercises, depreciation add-backs, and large itemized deductions can all push AMTI above those thresholds fast. The right timing of contributions makes the difference between owing AMT and not owing AMT. Instead runs a parallel regular-tax and AMT calculation for every strategy you consider, so you see exactly how each deduction or ISO exercise affects your Form 6251 before you file.

Review Instead's pricing plans to start your 2026 AMT exposure analysis.

Frequently asked questions

Q: What is the AMT exemption amount for 2026?

A: The 2026 AMT exemption is $90,100 for single filers and $140,200 for married couples filing jointly. OBBBA Sec. 70107 made these amounts permanent and inflation-indexed. The exemption phases out at $500,000 (single) and $1,000,000 (MFJ), with the exemption reduced by $0.25 for every dollar of AMTI above those thresholds.

Q: What would the AMT exemption be in 2026 without OBBBA?

A: Yes. Without OBBBA, the AMT exemption would have reverted to pre-TCJA levels of approximately $85,700 (single) and $133,300 (MFJ). That would have increased AMT liability for millions of taxpayers previously shielded by the higher TCJA amounts.

Q: Do Traditional 401k contributions lower your AMT in 2026?

A: Yes. Traditional 401k contributions reduce your AGI, which also reduces your AMTI. A $23,500 contribution by a taxpayer in the 26% AMT bracket reduces AMT liability by approximately $6,110. This makes the Traditional 401k one of the most effective tools for managing AMT exposure.

Q: How do incentive stock options trigger the alternative minimum tax?

A: When you exercise ISOs, the spread between the exercise price and fair market value is added to your AMTI as a preference item, even though it is not taxed for regular income tax purposes. A large exercise can push your AMTI above the exemption threshold. Splitting exercises across multiple tax years can reduce this impact.

Q: Can I claim a minimum tax credit for AMT paid in prior years?

A: Yes. If you paid AMT on deferral items like ISO exercises, you may claim an AMT credit in future years using Form 8801. The credit applies when timing differences reverse, such as when you sell ISO shares and pay regular capital gains tax. It can offset your regular tax in later years.

Q: Why are OBBBA AMT phaseout thresholds lower than TCJA levels?

A: OBBBA reverted phaseout thresholds to 2018 levels: $500,000 (single) and $1,000,000 (MFJ). Under the TCJA, those thresholds were approximately $1,040,000 and $1,570,000. Your exemption starts shrinking sooner if your AMTI falls between those levels. Review Form 6251 carefully.