The Alternative Minimum Tax (AMT) runs alongside the regular income tax system, ensuring that certain taxpayers pay a minimum amount of tax. To prevent middle‑income earners from being caught off guard, the IRS makes annual updates to AMT parameters. For the 2025 and 2026 tax years, these updates include inflation‑indexed exemptions, phase‑out thresholds, and strategic planning guidance to help filers avoid unexpected tax liabilities.
How the AMT Works
Unlike regular tax, the AMT disallows or adjusts deductions and income items, recalculating taxable income using a separate system and flat rates. Taxpayers must pay whichever tax—regular or AMT—is higher.
Key AMT Parameters for 2025 & 2026
The following table outlines the essential AMT amounts for singles and joint filers:
| Parameter | 2024 | 2025 | 2026 (Estimated) |
|---|---|---|---|
| AMT Exemption (Single) | $81,300 | $88,100 | $90,800 |
| AMT Exemption (Married Filing Jointly) | $126,500 | $137,000 | $141,200 |
| Phase‑out Threshold (Single) | $578,150 | $609,350 | $630,000 |
| Phase‑out Threshold (Married) | $1,156,300 | $1,218,700 | $1,260,000 |
Inflation indexing ensures that the exemption amounts and phase‑out thresholds rise each year, helping maintain relief for moderate‑income taxpayers.
Calculating AMT—What Changes in 2025
- Higher exemptions: More taxpayers can exclude a larger amount of AMT income.
- Raised thresholds: Exemption begins to phase out at higher income levels.
- Rate structure: AMT still levies 26% on income up to ~$232,600 and 28% above that, though future bracket limits may shift slightly.
Common AMT Triggers
Certain deductions or income types may prompt AMT liability:
- High state and local tax (SALT) deductions
- Exercised Incentive Stock Options (ISOs)
- Depreciation adjustments on businesses or rental properties
- Interest from private activity municipal bonds
- High miscellaneous deductions
Why You May Owe AMT—and How to Avoid It
The expanded exemptions and phase‑out thresholds for 2025 and 2026 offer welcome breathing room. But proper planning remains crucial.
- Plan ISO exercises carefully: Multiple ISO exercises can spike AMT—even if sale results in no regular tax gain.
- Manage SALT deductions: Large deductions may trigger AMT; consider deferral or lumping payments.
- Use tax software or Form 6251: Simultaneously calculate both regular and AMT liabilities to compare scenarios.
- Delay AMT-triggering deductions: Charitable gifts or medical expenses over AGI thresholds may affect future AMT exposure.
- Consider Roth conversions: Early Roth IRA conversions within the tax bracket buffers may increase AMT income unless timed strategically.
Impact on 2026 Filing & Beyond
Inflation-indexed increases in AMT thresholds and exemptions for 2026 should continue. Taxpayers should:
- Track inflation-related IRS announcements in fall 2025
- Review investment and compensation plans to assess AMT exposure
- Adjust withholding or estimated payments to reduce year-end surprises
Who’s Least Likely to Pay AMT in 2025–26?
With the raised thresholds, many middle-income taxpayers—including homeowners and parents—may no longer fall under AMT unless significant deductions or income irregularities occur.
Conclusion
While AMT may feel complex, the annual inflation adjustments for 2025 and projected 2026 amounts provide noticeable relief. Yet, households with significant SALT deductions, ISO income, or AMT‑sensitive items must strategize carefully.
By leveraging higher exemptions, monitoring key deduction thresholds, and running parallel calculations each filing season, taxpayers can anticipate or minimize AMT liability—turning a source of surprise into an opportunity for proactive planning.
