Will I owe AMT in 2026?

Probably not, unless you exercise ISOs or have very specific deduction patterns. The TCJA (2017) raised the AMT exemption dramatically and added inflation indexing, so post-TCJA the number of households paying AMT dropped from ~5 million per year (2017) to ~200,000 per year (2018+). The vast majority of W-2 workers, even high earners, no longer hit AMT. The remaining at-risk groups: ISO exercisers, residents of very-high-tax states with large itemized deductions, and people with complex AMT preference items.

What's the AMT exemption for 2026?

For 2026 (post-OBBBA): $90,100 for single/HOH filers and $140,200 for married filing jointly. OBBBA dropped the phaseout thresholds substantially and doubled the rate — exemption now phases out at 50 cents per $1 of AMTI above $500,000 (single/HOH) / $1,000,000 (MFJ), so the full exemption is gone by AMTI of about $680,200 single / $1,280,400 MFJ.

How is AMT calculated?

AMT is a parallel tax calculation. (1) Start with your taxable income. (2) Add back AMT preference items (ISO spread, certain state taxes, etc.). (3) Subtract the AMT exemption ($90,100 single / $140,200 MFJ in 2026). (4) Apply AMT rates: 26% on AMTI up to $244,500 above the exemption, 28% above. (5) Compare to your regular tax. (6) Pay whichever is HIGHER — you owe AMT to the extent it exceeds regular tax. Most tax software handles the comparison automatically.

What is the AMT credit and can I get it back?

When you pay AMT in a year, you accrue an AMT credit equal to the AMT paid (specifically, the portion attributable to 'timing differences' like ISO exercise). In future years when your regular tax exceeds AMT, you can claim the credit to recover that money. The credit carries forward indefinitely. For ISO exercisers: the AMT paid in the exercise year becomes a credit you recover when you sell the ISO shares (because the regular-tax basis steps up to FMV at exercise, while AMT basis already did — so the regular tax in the sale year is lower than AMT, and the credit kicks in).

Should I do an ISO disqualifying disposition to avoid AMT?

Sometimes yes. A 'disqualifying disposition' (selling ISO shares within 1 year of exercise OR within 2 years of grant) converts the gain to ordinary income and eliminates the AMT preference. You lose the long-term capital gains treatment but you avoid AMT and the year-end uncertainty. For exercisers facing massive AMT bills with no liquidity to pay, a same-day-sell of some shares can fund the AMT plus restore optionality. Run scenarios in our ISO/AMT calculator before deciding.

Does AMT apply to my W-2 income?

Yes — AMT calculates on your full taxable income, not just preference items. But for most W-2 workers, regular tax already exceeds AMT (because brackets above 28% kick in at lower income than AMT 28% does). So even though AMT is calculated on your wages, it's almost never the higher of the two unless you have meaningful AMT preference items (ISO spread, etc.). Wage earners with no equity comp essentially never pay AMT post-TCJA.

Updated for 2026

Alternative Minimum Tax (AMT)

A parallel tax that exists to make sure high earners pay something. Post-TCJA only ~200,000 households per year actually owe it — but if you exercise ISOs, you might be one of them.

2026 AMT Key Numbers

Exemption (Single)

$90,100

Exemption (MFJ)

$140,200

Phaseout Start (Single)

$500,000

Rates

26% / 28%

26% rate on AMTI up to $244,500 above exemption; 28% above. OBBBA 2025 dropped the phaseout thresholds and doubled the rate — exemption now phases out at 50¢ per $1 of AMTI above $500,000 (single) / $1,000,000 (MFJ).

Source: IRS Rev. Proc. 2025-32 (with OBBBA 2025 amendments to §55–§59 phaseout).

What is the Alternative Minimum Tax?

is a parallel federal tax calculation. Every tax year, the IRS quietly runs your return through TWO sets of math: (1) regular federal income tax (with all the brackets, deductions, and credits you're used to), and (2) AMT (a stripped-down version that disallows certain deductions and uses just two flat rates — 26% and 28%). You owe whichever number is HIGHER.

was created in 1969 to stop a small group of millionaires from paying $0 federal tax through aggressive deductions. For decades it wasn't inflation-indexed, so it crept down into upper-middle-class territory — by 2017, around 5 million households paid AMT. The (2017) raised the exemption dramatically and added inflation indexing. As of 2026, only ~200,000 households per year actually pay AMT — and most of them are exercisers, not regular wage earners.

For most workers and self-employed people in 2026, is irrelevant — your regular tax already exceeds your AMT calculation, so you owe regular tax and never see the AMT line on your 1040. The exception: if you exercise Incentive Stock Options without selling, the spread becomes an AMT preference item and can spike your AMT well above regular tax.

How AMT is calculated

1Start with your regular taxable income (the figure on Form 1040 line 15).
2Add back preference items ( spread, certain state taxes, private-activity bond interest, depreciation differences, etc.) to get — Alternative Minimum Taxable Income.
3Subtract the exemption ($90,100 single / $140,200 in 2026). The -amended exemption phases out at 50 cents per $1 of AMTI above $500,000 (single) / $1,000,000 (MFJ), so the full exemption is gone by AMTI of about $680K (single) / $1.28M (MFJ).
4Apply rates: 26% on the first $244,500 of above the exemption, 28% on amounts above that.
5Compare to regular tax. You owe whichever is HIGHER. The 'amount' on Form 6251 is the EXCESS of AMT over regular tax — that's what you actually add to your tax bill. If regular tax already exceeds AMT, the AMT line is $0 and you forget about it.

Common AMT triggers

ISO exercise (the #1 trigger by far)

When you exercise Incentive Stock Options, the spread between exercise price and fair market value is an preference item — even if you don't sell the shares. Regular tax sees $0 gain (you haven't sold); AMT sees the full spread as taxable income. A startup employee exercising 50,000 ISOs at a $1 strike when shares are worth $20 has a $950,000 AMT preference. AMT can hit 28% on the upper portion. Result: a 6-figure AMT tax bill on stock you can't sell yet.

Large state and local tax (SALT) deductions

doesn't allow the state and local tax deduction at all. AMT adds back whatever you deducted on Schedule A — and raising the regular SALT cap from $10K to $40,400 for 2026 made this trigger noticeably bigger again. A CA or NY itemizer claiming $40K of SALT under OBBBA gets the full $40K added back for AMT, versus only $10K under the prior TCJA cap. High-tax-state residents who itemize the full new cap will feel renewed AMT pressure that had partially faded since 2018.

Large miscellaneous itemized deductions

Deductions like investment management fees and unreimbursed employee expenses are not allowed for . The largely eliminated these for regular tax too, so this trigger has shrunk dramatically since 2017.

Private activity bond interest

Interest from certain private activity municipal bonds is -taxable even though it's federally tax-free for regular tax. Mostly an issue for retirees with large municipal bond portfolios.

Personal exemptions for dependents (pre-TCJA)

Pre-2018, having many dependents triggered because each personal exemption ($4,050 in 2017) was added back. eliminated the personal exemption entirely, so this trigger no longer applies.

Worked example: ISO exercise hits AMT

Startup engineer earning $200K W-2, exercises 50,000 ISO options at $1 strike when fair market value is $20. Doesn't sell.

REGULAR TAX (no exercise impact since not sold)

W-2 wages: $200,000
Standard deduction: −$16,100
Regular taxable income: $183,900
Regular federal tax (2026 brackets, single): ~$36,700

AMT CALCULATION

Regular taxable income: $183,900
+ ISO spread (50,000 × ($20 − $1)): +$950,000
+ Standard deduction added back (AMT doesn't allow it after TCJA tweaks; treatment varies): +$0
AMTI before exemption: $1,133,900
AMT exemption (fully phased out at this AMTI): $0
AMTI after exemption: $1,133,900
26% × $244,500 (lower bracket): $63,570
28% × ($1,133,900 − $244,500): $249,032
Total AMT: ~$312,600

Regular tax (what they'd owe normally): $36,700
AMT calculation: $312,600
Owe (the higher of the two): $312,600
AMT excess (the surprise tax bill): $275,900

The crisis: the engineer owes $275,900 of on shares they haven't sold and may not be able to sell (private company stock). They have to come up with the cash from outside the equity. This is why exercise without an exit plan is one of the most common ways high earners blow up their finances. The fix: same-day disqualifying disposition of some shares to fund the AMT, or wait to exercise until you can also sell.

The silver lining: the $275,900 of becomes an AMT credit. When the engineer eventually sells the shares (year 3+, qualifying disposition for long-term capital gains), the regular tax on the sale is high; the AMT credit reduces it dollar-for-dollar. They effectively recover the AMT over 1–10 years depending on subsequent income. So AMT on ISO exercise is a timing event, not a permanent tax — but only if you can actually pay it in cash now.

The AMT credit (your money back)

When you pay , you accrue an 'AMT credit' — specifically, the portion of AMT attributable to 'timing differences' ( exercise being the biggest one). The credit carries forward indefinitely. In future years when your regular tax exceeds AMT, you can apply the credit to reduce your federal tax liability dollar-for-dollar.

For exercisers, the mechanism works like this: in the exercise year you pay on the spread. In the sale year (assuming qualifying disposition, ≥2 years from grant + ≥1 year from exercise), regular tax sees the FULL gain (sale price minus exercise price) as long-term capital gain. AMT sees only the gain since exercise (because AMT basis already stepped up to at exercise). The regular-tax bill on the sale is much higher than AMT — and the AMT credit kicks in to offset it. You recover the AMT over 1-10 years.

Track credit on Form 8801 (Credit for Prior Year Minimum Tax) every year. If you ever fail to file Form 8801, you can amend prior returns up to 3 years back to claim missed credit. Many exercisers leave AMT credit on the table because they don't realize it carries forward.

Run the AMT math for your situation

If you have ISOs to exercise or are sitting on a spread, run the numbers before you commit. The ISO/AMT calculator handles the parallel calculation, exemption phaseout, and AMT credit projection in one place.

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