AMT in 2026: Exemption Shrinks 50 Cents per Dollar From $500,000
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Quick Answer
For 2026 the AMT exemption is $90,100 (single) and $140,200 (joint), and it now disappears twice as fast and from a much lower income. Under 26 U.S.C. 55(d), as changed by Public Law 119-21 section 70107, the exemption shrinks by 50 cents for each dollar of AMT income above $500,000 (single) or $1,000,000 (joint). In 2025 it shrank by 25 cents above $626,350 and $1,252,700. It reaches zero at $680,200 (single) and $1,280,400 (joint), against $978,750 and $1,800,700 in 2025 (Rev. Proc. 2025-32 section 4.10; Instructions for Form 6251 (2025)). Inside that zone each extra dollar of AMT income is taxed at 42 cents when the 28% bracket applies, which is 28% times 1.5 (our arithmetic). In one worked case, a joint filer with $1,200,000 of AMT income owes $27,689.50 of AMT, against $13,689.50 at the old 25% rate (our arithmetic). Depreciation on real property is rarely the cause. The IRS counted 150,167 returns with AMT for tax year 2023 (before this change), against 5,075,419 for 2017, and in 2022 the two income classes from $500,000 paid 75.3% of the dollars (our arithmetic). Rules as of October 22, 2026; the 2027 amounts were not published yet.
Key Takeaways
- Public Law 119-21 section 70107 made the higher AMT exemption permanent but added subclause (IV) to 26 U.S.C. 55(d)(4)(A)(ii), substituting 50 percent for 25 percent in the phase-out. It applies to tax years beginning after December 31, 2025, so 2026 is the first year.
- The 2026 exemption is $140,200 (joint or surviving spouse), $90,100 (unmarried), $70,100 (married filing separately) and $31,400 (estates and trusts), per Rev. Proc. 2025-32 section 4.10.
- The phase-out starts at $1,000,000 (joint) and $500,000 (everyone else but estates and trusts) of AMT income, and ends at $1,280,400 and $680,200. The 2025 starting points were $1,252,700 and $626,350, and the 2025 ending points $1,800,700 and $978,750.
- The zone is narrower and steeper: $280,400 wide for joint filers against $548,000 in 2025, and each $10,000 of AMT income inside it removes $5,000 of exemption against $2,500 (our arithmetic).
- For real estate, the Instructions for Form 6251 say real property placed in service after 1998 uses the straight line method, the same as the regular tax, and bonus depreciation creates no adjustment when the basis is the same. The usual triggers are the add-back of state and local taxes, private activity bond interest and stock option exercises.
- The IRS counted 150,167 returns with AMT and $2.75 billion of tax for 2023, against 5,075,419 returns and $36.40 billion for 2017. In 2022, 101,187 of the 198,059 AMT returns had adjusted gross income of $1,000,000 or more. Those years used the old, higher phase-out thresholds, so they do not predict 2026.
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Alternative minimum tax 2026: exemption amounts, the 50 percent phase-out, worked cases and IRS Statistics of Income data
137 rows: the P.L. 119-21 section 70107 text, the 2026 and 2025 exemption, phase-out and 28 percent breakpoint amounts, the exemption at the same AMT income under both rules, two worked cases (our arithmetic), the Form 6251 and Schedule K-1 box 17 lines for real estate investors, and IRS SOI counts of AMT returns.
What the 2025 law changed in section 55
The alternative minimum tax (AMT) is a second tax calculation. The Instructions for Form 6251 put it this way: “The AMT is a separate tax that is imposed in addition to your regular tax.” You attach Form 6251 if, among other cases, line 7 (the tentative minimum tax before credits) is greater than line 10 (your regular tax).
Two things sit inside the AMT calculation: an exemption (a flat amount subtracted from AMT income) and a bracket structure of 26% and 28%. Public Law 119-21 section 70107 changed the first one, in three steps:
- Permanent. Subsection (a) strikes the words “and before January 1, 2026” from section 55(d)(4)(A), so the higher 2018-style exemption amounts and thresholds no longer expire. Rev. Proc. 2025-32 section 2.07 summarizes it as making the temporary increases “permanent”.
- Lower threshold for joint filers, indexed from 2027. The statute now reads that the exemption phase-out for a joint return starts at $1,000,000 (substituted for $150,000 in section 55(d)(2)(A)), and for an unmarried individual at 50 percent of that amount, $500,000. Section 70107(b) adds that this $1,000,000 is not inflation-adjusted before 2027 and then uses calendar year 2025 as its base. In 2025 the corresponding thresholds were $1,252,700 and $626,350, because the TCJA-era dollar amounts had been indexed every year.
- Faster phase-out. Subsection (c) adds subclause (IV) to section 55(d)(4)(A)(ii): the phase-out is applied by substituting 50 percent for 25 percent. The base text of section 55(d)(2) still reads that the exemption is reduced by “25 percent of the amount by which the alternative minimum taxable income of the taxpayer exceeds” the threshold, so you have to read subsection (d)(4) to see the 50.
Subsection (d) makes it apply to taxable years beginning after December 31, 2025. For a calendar-year individual, 2026 is the first year, and the 2026 return is the one you file in 2027.
The 2026 numbers beside 2025
| Filing status | Exemption 2026 | Exemption 2025 | Phase-out starts 2026 | Phase-out starts 2025 | Exemption is zero 2026 | Exemption is zero 2025 |
|---|---|---|---|---|---|---|
| Joint return or surviving spouse | $140,200 | $137,000 | $1,000,000 | $1,252,700 | $1,280,400 | $1,800,700 |
| Unmarried (single or head of household) | $90,100 | $88,100 | $500,000 | $626,350 | $680,200 | $978,750 |
| Married filing separately | $70,100 | $68,500 | $500,000 | $626,350 | $640,200 | $900,350 |
| Estates and trusts | $31,400 | $30,700 | $104,800 | not used here | $167,600 | not used here |
Sources: Rev. Proc. 2025-32 section 4.10 (2026); Rev. Proc. 2024-40 section 2.11 for the 2025 exemption; Instructions for Form 6251 (2025), the “What’s New” text and the Exemption Worksheet note, for the 2025 thresholds and zero points. Our trust bracket page, trust tax brackets for 2026, carries the trust line.
The 28% rate also moves with inflation. Rev. Proc. 2025-32 says that for 2026 the 28% rate applies to excess taxable income over $244,500 ($122,250 if married filing separately); for 2025 the figure was $239,100. On the 2025 Form 6251 line 7 you multiply line 6 by 28% and subtract $4,782, which is 2% of $239,100. The 2026 form and instructions were not on IRS.gov when we checked on October 22, 2026, so the matching 2026 subtraction, 2% of $244,500, is $4,890 (our arithmetic).
How much exemption disappears at the same income
The change is easiest to see by holding AMT income (AMTI, Form 6251 line 4) fixed and applying each year's rules. Each cell below is the exemption that Form 6251 line 5 would show (our arithmetic from the amounts above).
| Filing status | AMT income | Exemption under 2026 rules | Exemption under 2025 rules | 2026 minus 2025 |
|---|---|---|---|---|
| Joint | $1,000,000 | $140,200 | $137,000 | +$3,200 |
| Joint | $1,100,000 | $90,200 | $137,000 | -$46,800 |
| Joint | $1,200,000 | $40,200 | $137,000 | -$96,800 |
| Joint | $1,280,400 | $0 | $130,075 | -$130,075 |
| Joint | $1,500,000 | $0 | $75,175 | -$75,175 |
| Single | $500,000 | $90,100 | $88,100 | +$2,000 |
| Single | $550,000 | $65,100 | $88,100 | -$23,000 |
| Single | $626,350 | $26,925 | $88,100 | -$61,175 |
| Single | $680,200 | $0 | $74,637.50 | -$74,637.50 |
| Single | $800,000 | $0 | $44,687.50 | -$44,687.50 |
Two patterns. First, a filer just over the threshold is barely affected, because the 2026 starting exemption is a little higher. Second, the largest loss, relative to the 2025 rules, is at the top of the new zone: a joint filer at $1,280,400 loses the entire $130,075 that the 2025 rules still left. At the 28% rate that is $36,421 of extra tentative minimum tax at that income (our arithmetic: 28% of $130,075). Above $1,800,700 joint or $978,750 single the two years give the same answer, zero.
The steeper slope. Inside the zone, every extra dollar of AMTI both adds to the base and removes 50 cents of exemption, so the base grows by $1.50. At 28% that is 42 cents of tax per dollar, against 35 cents in 2025 (our arithmetic: 28% times 1.50 and 28% times 1.25). The top regular rate is 37%. Whether you owe AMT depends on the whole comparison, but for a filer whose tentative minimum tax is already above the regular tax, the gap now widens by about 5 cents on each additional dollar in the zone (our arithmetic: 42% less 37%).
Two worked cases (our arithmetic)
Both cases are deliberately simple: ordinary income only, no capital gains or qualified dividends (Part III of Form 6251 would apply the capital gain rates), no credits, no net investment income tax and no state tax. The 2026 regular tax comes from tables 1 and 3 of section 4.01 of Rev. Proc. 2025-32. The $4,890 subtraction is our arithmetic, as explained above. The AMT adjustments are assumptions chosen to show the mechanics.
| Line | Case A: joint, 2026 | Case B: single, 2026 |
|---|---|---|
| Regular taxable income (assumed) | $1,000,000 | $520,000 |
| Regular tax | $292,164.50 ($206,583.50 plus 37% of $231,300) | $150,769.25 ($58,448 plus 35% of $263,775) |
| Add back (assumed) | $10,000 of taxes (line 2a) and $190,000 of private activity bond interest (line 2g) | $10,000 of taxes (line 2a) and $150,000 of incentive stock option spread (line 2i) |
| AMT income (line 4) | $1,200,000 | $680,000 |
| Exemption after the 50% phase-out | $40,200 ($140,200 less 50% of $200,000) | $100 ($90,100 less 50% of $180,000) |
| Line 6 | $1,159,800 | $679,900 |
| Tentative minimum tax (28% of line 6 less $4,890) | $319,854 | $185,482 |
| AMT (tentative minimum tax less regular tax) | $27,689.50 | $34,712.75 |
| AMT if the phase-out rate were still 25% | $13,689.50 (exemption $90,200) | $22,112.75 (exemption $45,100) |
| Extra AMT from the doubled rate | $14,000 | $12,600 |
In case B the same $680,000 of AMT income under 2025 rules would have kept an exemption of $74,687.50 (our arithmetic: $88,100 less 25% of $53,650). The $10,000 add-back assumes the state and local tax deduction is at its $10,000 floor: Public Law 119-21 section 70120 sets the 2026 cap at $40,400, reduced by 30 percent of income over $505,000 and not below $10,000, so that is the case from about $606,300 of modified adjusted gross income (our arithmetic). Our PTET and SALT cap page covers that cap.
What puts income into AMT income for a real estate investor
Form 6251 starts from regular taxable income and adds adjustments. The lines below come from the Instructions for Form 6251 (2025) and the Partner’s Instructions for Schedule K-1 (Form 1065) (2025).
| Item | Form 6251 line | What the IRS text says | Where a real estate investor meets it |
|---|---|---|---|
| State and local taxes, or the standard deduction | 2a | Enter the taxes from Schedule A line 7; if you do not file Schedule A, enter the standard deduction | Property tax and state income tax. The instructions add that “the standard deduction isn’t allowed for the AMT” |
| Interest from specified private activity bonds | 2g | Reported in box 9 of Form 1099-INT; exempt-interest dividends count to the extent they come from those bonds, in box 13 of Form 1099-DIV | A municipal bond fund can carry it without your knowing |
| Incentive stock options | 2i | The excess of the stock’s fair market value over what you paid when the shares first become transferable or free of forfeiture risk | An executive or founder with options, whatever the real estate holdings |
| Post-1986 depreciation | 2l | Property placed in service after 1998: 150% declining balance for property other than section 1250 property; “straight line method” for section 1250 property | Residential and commercial buildings use straight line for both, so no adjustment |
| Special (bonus) depreciation | 2l | No adjustment when the depreciable basis is the same for the AMT and the regular tax | Cost segregation items expensed at 100% do not by themselves create an AMT adjustment |
| Passive activities | 2m | Refigure passive gains and losses for the AMT | A rental loss is limited again under the AMT rules, with its own carryforward |
| Disposition of property | 2k | Gain or loss refigured with the AMT basis | A sale of a rental or an interest in a fund |
| Qualified small business stock acquired before September 28, 2010 | 2h | 7% of the excluded gain | See our [QSBS page](/articles/qsbs-section-1202-exclusion-limits-by-acquisition-date-2026) |
| Schedule K-1 (Form 1065) box 17 | 2l, 2k, 2d, 2t | Code A depreciation adjustment, code B adjusted gain or loss, code C depletion, codes D and E oil and gas, code F other AMT items | A fund or syndication K-1; code F items come on an attached statement |
The premise that heavy depreciation drives AMT is mostly out of date for buildings. For property placed in service after 1998 the 2025 instructions say: “Use the same convention and recovery period used for the regular tax.” For section 1250 property they say to use the straight line method. They also say that for qualified property eligible for a special depreciation allowance, “no adjustment is required” where the depreciable basis is the same for the AMT and the regular tax. Our bonus depreciation page explains the 100% rule. Real estate K-1s still carry box 17 amounts, and we read the form from the K-1 box guide.
The instructions work one example of a partner whose Schedule K-1 shows a passive activity loss of $4,125, a depreciation adjustment of $500 and an adjustment of $225 on the disposition of property. Because those two adjustments come from the passive activity, the loss is reduced by them and the AMT passive loss is $3,400 (our arithmetic: $4,125 less $500 less $225). Our passive loss page covers the regular-tax side of that limit, and the real estate professional page the exception to it.
One more rule that can matter in the zone: the credit for prior year minimum tax. The instructions say “If you pay AMT for 2025, you may be able to take a credit on Form 8801 for 2026.” AMT that arises from timing items such as depreciation or stock options can come back as a credit in later years; AMT from permanent items does not.
Who actually pays: IRS data for tax year 2022
The IRS Statistics of Income (Publication 1304, Figure D) shows the AMT computation by size of adjusted gross income (AGI). These are 2022 numbers, which means the pre-2026 rules and phase-out thresholds. Treat them as a measure of who pays the tax, not of how many will pay in 2026. The complete report with the income breakdown was published only up to 2022 when we checked.
| Tax year 2022 AGI | Returns with AMT computation on Form 6251 | Returns that owed AMT | Share that owed it (our arithmetic) | AMT, millions | Average AMT per paying return (our arithmetic) |
|---|---|---|---|---|---|
| $100,000 under $200,000 | 1,320,867 | 15,081 | 1.1% | $110.2 | $7,308 |
| $200,000 under $500,000 | 1,106,966 | 39,907 | 3.6% | $695.5 | $17,427 |
| $500,000 under $1,000,000 | 410,426 | 31,511 | 7.7% | $641.5 | $20,357 |
| $1,000,000 or more | 362,178 | 101,187 | 27.9% | $2,446.1 | $24,174 |
All told, 198,059 returns owed $4.10 billion of AMT for 2022. The two classes from $500,000 account for 132,698 returns, 67.0% of the AMT returns, and $3.09 billion, 75.3% of the dollars (our arithmetic). The series for all returns, from the year before the 2018 law to the latest year the IRS has published:
| Tax year | Returns with AMT | AMT, billions |
|---|---|---|
| 2017 | 5,075,419 | $36.40 |
| 2018 | 244,007 | $4.02 |
| 2019 | 170,478 | $2.79 |
| 2020 | 156,549 | $2.94 |
| 2021 | 243,550 | $5.60 |
| 2022 | 198,059 | $4.10 |
| 2023 | 150,167 | $2.75 |
The 2018 law took AMT returns from about 5.1 million to under 250,000 in one year. The effect of the 2026 change will not show in this table until the IRS publishes tax year 2026.
What a reader can do with this before December 31, 2026
- Find your AMT income before the year ends. Run last year’s Form 6251 with the 2026 exemption, threshold and breakpoint amounts from the table above; the 2026 form is not out. Your answer on line 7 against line 10 shows whether AMT is a live question.
- Check whether you are inside the zone. If your AMT income is under $500,000 (single) or $1,000,000 (joint), the exemption is whole and this change does not touch you.
- List the add-backs you actually have. Taxes on line 2a, specified private activity bond interest from a Form 1099-INT box 9 or Form 1099-DIV box 13, incentive stock option exercises, and the K-1 box 17 codes.
- Look at the K-1s you expect. A fund that sends box 17 code A or B amounts changes line 2l or 2k; ask the sponsor for the attached statement for code F.
- Keep the Form 8801 record. AMT paid in 2025 or earlier may come back as a credit.
- Ask a preparer about timing. The 42% marginal rate applies only inside the zone, and a sale, an option exercise or a large K-1 can land in it in one year and not the next.
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Sources, read and saved on October 22, 2026: Public Law 119-21, sections 70107 and 70120 (139 Stat. 72, July 4, 2025); 26 U.S.C. 55 as shown on the Cornell Legal Information Institute; IRS Revenue Procedure 2025-32 (sections 2.07, 4.10 and 4.01) and Revenue Procedure 2024-40 (section 2.11); Form 6251 (2025) and the Instructions for Form 6251 (2025, January 8, 2026 edition); the Partner’s Instructions for Schedule K-1 (Form 1065) (2025); IRS Statistics of Income, Publication 1304 (Rev. 1-2025), Table A and Figure D. Our arithmetic is marked. This is analysis of public documents, not investment, legal or tax advice.
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