• State and Local Tax (SALT) Deductions: The $10,000 SALT cap forces residents of high-tax states to add back significant deductions when calculating AMTI. Someone with $35,000 in actual SALT obligations but limited to $10,000 regular deduction must add back $25,000 for AMT purposes.
• Private Activity Bond Interest: Interest on certain municipal bonds (used for non-essential government purposes) is tax-exempt for regular income tax but treated as a preference item for AMT.
• Depreciation Adjustments: Business owners and real estate investors recalculate depreciation using the Alternative Depreciation System (ADS) for AMT, often resulting in lower deductions and higher AMTI.
• Incentive Stock Options (ISOs): The spread between exercise price and fair market value when ISOs are exercised increases AMTI, creating substantial exposure for corporate executives.
• Passive Activity Losses: While passive losses offset passive income on regular returns, they cannot offset other income for AMT purposes.
• Charitable Contribution Deduction Limitations: Certain charitable deduction limitations differ between regular tax and AMT calculations.
• Medical Expense Deductions: The 7.5% AGI floor for medical expenses doesn't apply equally under both systems.

High-Risk Taxpayer Profiles for 2026:<

Strategic Planning for 2026 TCJA Sunset and AMT Exposure