Alternative Minimum Tax (AMT) 2026 Changes: What to Know

This article is for educational purposes only and is not tax, legal, or financial advice. Tax rules change, and AMT math depends on your full return. Check current IRS guidance or consult a qualified tax professional before acting.

For years the Alternative Minimum Tax felt like a fading threat. Then the One Big Beautiful Bill Act (OBBBA) rewrote its edges for 2026, and it is back on the radar for high earners.

Whether the change helps you or costs you depends almost entirely on how much you make.

What changed for AMT in 2026 (the short version)

Start with the part that helps most people. OBBBA made the higher, TCJA-era AMT exemptions permanent. For most middle-income households, the exemption is large enough that the AMT never bites, and that did not change.

The part that stings is aimed at high earners. OBBBA cut the exemption phaseout thresholds back to their 2018 levels: $500,000 for single filers and $1,000,000 for married filing jointly. It also doubled the phaseout rate from 25% to 50%.

In plain terms, once your income crosses those lines, your AMT exemption disappears twice as fast as it used to. The tax now targets roughly the $500,000 to $1.5 million band, where the exemption evaporates quickly and a couple of common items can tip you into owing it.

Take the standard deduction on a wage income under a few hundred thousand dollars, and the 2026 AMT almost certainly still does not apply to you. Earn more than that with stock options, big capital gains, or a large state tax bill, and it might. Keep reading.

How the AMT actually works: a parallel tax system

The AMT is a second way of calculating your federal income tax that runs alongside the regular system. You compute your tax both ways and pay the higher of the two.

The mechanics go in four steps. First, you start with your regular taxable income, then add back certain deductions and items the AMT does not allow. That produces your alternative minimum taxable income (AMTI).

From AMTI you subtract your AMT exemption, assuming you still qualify for one. What remains is the AMT base, and applying the AMT rates to that base gives you your tentative minimum tax.

Then you compare the tentative minimum tax to your regular tax. If the tentative minimum tax is higher, the difference is your AMT, and you add it on top of your regular tax. All of it gets reported on Form 6251.

Why do the two systems diverge? The add-backs. The regular system lets you subtract things like large state and local taxes; the AMT does not. So a return that looks modest under regular rules can show a much larger base once you run it through the AMT.

The 2026 numbers: exemptions, phaseouts, and rates

Here are the figures that matter for tax year 2026, drawn from IRS Revenue Procedure 2025-32 and published 2026 parameter tables.

AMT exemption amounts:

Filing status	2026 AMT exemption
Single / Head of household	$90,100
Married filing jointly	$140,200
Married filing separately	$70,100

Phaseout and rates:

Exemption phaseout begins at $500,000 (single and other filers) and $1,000,000 (married filing jointly). MFS is half the joint amount.
The phaseout rate is 50%: every $1 of AMTI over the threshold removes $0.50 of exemption.
AMT rates are 26% on the first $244,500 of the AMT base and 28% above it ($122,250 for MFS).

The phaseout change is the whole story. Under the prior rules, a married couple’s exemption did not fully vanish until roughly $1.8 million of AMTI. For 2026, with the lower $1,000,000 start and the doubled 50% rate, the exemption is completely gone at about $1.28 million of AMTI.

That pulls a lot of high earners into losing exemption protection sooner. Compared to 2025, nothing changed for a household earning $150,000. For a household in the seven-figure zone, almost everything did.

For a refresher on the regular brackets these AMT rules sit next to, see our 2026 federal tax brackets guide.

What triggers AMT (and the ISO trap)

The AMT rarely appears out of nowhere. It shows up when high income meets one or more “preference items,” the deductions and income types the AMT treats differently. The usual suspects:

Incentive stock option (ISO) exercises where you hold the shares past year-end.
Large long-term capital gains that push your AMTI up into the phaseout zone.
High state and local taxes (SALT), which the AMT adds back in full.
Private-activity-bond interest, which is tax-free under regular rules but counted under AMT.

The ISO case is the one that catches people off guard, so it is worth a closer look.

The ISO paper-gain problem

When you exercise incentive stock options and keep the shares, the bargain element (the fair market value at exercise minus your strike price) is not regular-tax income. But it is an AMT preference item, reported on Form 6251, line 2i.

So you can exercise options, receive zero cash, and still owe AMT on a paper gain. If the stock later drops, that stings twice.

There is some relief. Selling the shares in the same calendar year (a disqualifying disposition) pulls the bargain element back out of AMTI. And when you do pay AMT on an ISO exercise, you generally get an AMT basis adjustment and a minimum tax credit that can recover the timing difference in later years, once your regular tax exceeds your tentative minimum tax. It is a timing hit, not always a permanent one, but the cash-flow shock in the exercise year is real.

A quick self-screen: if you have high income and a large SALT bill and either an ISO exercise or a big capital gain in the same year, run the AMT numbers before you file.

Worked example: a high-earning couple in the new phaseout zone

Numbers make this concrete. Meet Priya and Marcus, married filing jointly. (Figures are rounded and simplified to show the mechanics.)

Their regular taxable income for 2026 is about $780,000. During the year, Marcus exercised ISOs with a $350,000 bargain element and held the shares. Add roughly $20,000 of SALT and other AMT add-backs.

Step 1: Find AMTI. $780,000 + $350,000 + $20,000 = $1,150,000.

Step 2: Apply the exemption phaseout. AMTI over the $1,000,000 threshold is $150,000. At the 50% rate, that removes $75,000 of exemption. Remaining exemption: $140,200 − $75,000 = $65,200.

Step 3: Compute the AMT base and tentative minimum tax. Base: $1,150,000 − $65,200 = $1,084,800. 26% on the first $244,500 = $63,570. 28% on the remaining $840,300 = $235,284. Tentative minimum tax = about $298,854.

Step 4: Compare to regular tax. Their regular tax on $780,000 is roughly $210,765. Because the tentative minimum tax is higher, the difference is AMT: about $88,000 extra, driven almost entirely by the held ISO shares and the shrunken exemption.

Under the old rules, more of that $140,200 exemption would have survived, and the ISO exercise might have been timed to soften the blow. That is exactly the kind of planning the 2026 phaseout makes more valuable.

Planning moves and how to check your own return

You cannot repeal the AMT, but you can manage the timing of what triggers it. A few levers worth discussing with a professional:

Time ISO exercises. Spreading exercises across calendar years, or exercising fewer shares in a year when you are already near the phaseout, can keep AMTI below the cliff. Some filers exercise up to the point just before AMT kicks in.
Consider a same-year sale. A disqualifying disposition removes the bargain element from AMTI, at the cost of ordinary-income treatment on the gain. Whether that trade is worth it depends on your full picture.
Spread capital gains across years. A single large gain can be what pushes AMTI past $1,000,000. Staging sales can keep you under the phaseout.
Track your minimum tax credit. If you pay AMT because of ISOs, keep records of the basis adjustment and credit so you can reclaim it in future years.
Watch the cliff, not just the average. The 50% phaseout means income near the threshold is unusually expensive. Know where you stand before December.

The fastest way to see whether any of this applies to you is to build out your return and watch the number move. Tax47 assembles your 2026 return from your real W-2, 1099, and Schedule C figures with the One Big Beautiful Bill changes applied, and the AMT is computed inside the engine so it surfaces in your summary when it applies. It is not a standalone AMT calculator, but it will tell you if the AMT is in play for your return before you sit down with a CPA.

You can also sanity-check the regular side of your return with our tax bracket calculator and browse the rest of the tax tools while you plan.

Frequently Asked Questions

Did the alternative minimum tax change for 2026?

Yes. The One Big Beautiful Bill Act made the higher TCJA exemptions permanent but cut the phaseout thresholds to $500,000 single and $1,000,000 married filing jointly, and doubled the phaseout rate to 50%. That re-aims the AMT at high earners while leaving most middle-income filers untouched.

What is the AMT exemption for 2026?

The 2026 AMT exemption is $90,100 for single and head-of-household filers, $140,200 for married filing jointly, and $70,100 for married filing separately.

At what income does the 2026 AMT exemption start phasing out?

The exemption begins to phase out at $500,000 of alternative minimum taxable income for single and other filers, and $1,000,000 for married filing jointly. Married filing separately is half the joint amount. These thresholds are indexed for inflation going forward.

When is the AMT exemption fully phased out in 2026?

For a married couple filing jointly, the exemption is fully gone at roughly $1.28 million of alternative minimum taxable income in 2026, versus about $1.8 million under the old rules. The lower threshold and faster 50% phaseout are what pull that point in.

What are the 2026 AMT tax rates?

The AMT uses two rates: 26% on the first $244,500 of the AMT base and 28% on any amount above it. For married filing separately, the 28% rate starts at $122,250.

How do incentive stock options (ISOs) trigger AMT?

Exercising incentive stock options and holding the shares past year-end adds the bargain element (fair market value at exercise minus your strike price) to alternative minimum taxable income on Form 6251, line 2i. It is not regular-tax income at exercise, so you can owe AMT on a paper gain with no cash in hand.

What triggers the alternative minimum tax?

High income combined with preference items. The common ones are incentive stock option exercises, large long-term capital gains, high state and local taxes, and private-activity-bond interest. A simple screen is high income plus SALT plus an ISO exercise or a large gain.

Sources & References

IRS Revenue Procedure 2025-32 (2026 inflation adjustments, incl. OBBBA amendments) — Official 2026 AMT exemption and phaseout figures.
IRS Instructions for Form 6251 (Alternative Minimum Tax—Individuals) — How the AMT is computed, including ISO reporting on line 2i.
Tax Foundation: 2026 Tax Brackets and Federal Income Tax Rates — 2026 AMT rate breakpoints and phaseout thresholds.

Estimates only. This article does not constitute tax, legal, or financial advice. Verify current figures against IRS guidance and consult a qualified professional for your situation.