Beginning in 2018, tax reform increases the alternative minimum tax (AMT) exemption amount and the exemption phaseout thresholds to the following amounts:
Here are the exemption phaseout thresholds:
These amounts will be adjusted for inflation until the provision expires after 2025.
Most taxpayers will no longer find themselves subject to AMT for the following reasons:
Note that the first two are traditional add-backs for AMT.
AMT will continue to impact taxpayers with more substantial transactions that have AMT adjustments, such as incentive stock options. The planning opportunities will revolve around keeping taxable income below the income threshold amounts during the years that the AMT transaction transpires.
For example, taxpayers could potentially exclude gain from certain small business stock if it meets the Internal Revenue Code (IRC) Section 1202 guidelines. The exclusion does include an AMT add-back component, which historically made the provision less lucrative. If you’re expecting a transaction that meets the IRC Section 1202 guidelines, it will be vital to defer income or accelerate deductions to remain below the income threshold of $1 million for married filers or $500,000 for other taxpayers.