Form 6251 alternative minimum tax for 2026, with the exemption phase-out that starts at $500,000
Updated October 2026
1. AMT income (AMTI). Start with taxable income, then add back items the AMT does not allow: state and local taxes if you itemize, or the standard deduction if you do not; the Schedule 1-A deductions (tips, overtime, senior, car loan interest), which the AMT treats like personal exemptions; the bargain element of incentive stock options exercised and held at year end; and interest on private activity bonds. 2. Exemption. Subtract the exemption, reduced if AMTI is above the phase-out threshold. 3. Tentative minimum tax. 26% of the AMT base up to $244,500 (2026), 28% above. 4. AMT is the amount by which the tentative minimum tax exceeds regular tax.
The published worksheet check (2025). The 2025 Form 6251 instructions zero the exemption once AMTI reaches $978,750 for single filers: $626,350 threshold + $88,100 exemption ÷ 25% = $978,750; for joint filers $1,252,700 + $137,000 ÷ 25% = $1,800,700. For 2026 the same logic with the new 50% rate gives $500,000 + $90,100 ÷ 50% = $680,200 single and $1,000,000 + $140,200 ÷ 50% = $1,280,400 joint, the complete phase-out amounts in Revenue Procedure 2025-32.
Default case. Single, $220,000 taxable income, standard deduction, $150,000 ISO spread: AMTI = $220,000 + $16,100 + $150,000 = $386,100. Under $500,000, so the full $90,100 exemption applies; base $296,000. Tentative minimum tax = 28% × $296,000 − 2% × $244,500 = $77,990. Regular tax on $220,000 is $46,856, so AMT is $31,134.
| Filing status | Exemption | Phase-out starts | Exemption gone at | 28% rate above |
|---|---|---|---|---|
| Single or head of household | $90,100 | $500,000 | $680,200 | $244,500 |
| Married filing jointly | $140,200 | $1,000,000 | $1,280,400 | $244,500 |
| Married filing separately | $70,100 | $500,000 | $640,200 | $122,250 |
Public Law 119-21 made the higher exemptions permanent but reset the phase-out thresholds to their 2018 levels ($500,000 and $1,000,000, indexed after 2026) and doubled the phase-out rate from 25% to 50%. Inside the phase-out range each extra dollar of AMTI adds 50 cents to the AMT base, so the effective AMT rate there is 39% to 42%.
Taxable income is Form 1040 line 15. Choose whether you itemized: if so, enter the state and local taxes on Schedule A line 7; if not, the calculator adds back your 2026 standard deduction. The ISO bargain element is the fair market value on the exercise date minus the exercise price, for shares you still hold at year end (your employer’s Form 3921 shows both). Private activity bond interest is in box 9 of Form 1099-INT or 1099-DIV. Schedule 1-A deductions are lines from that schedule. Other adjustments cover less common items such as depreciation differences.
| Situation | AMTI | Exemption | Tentative minimum tax | Regular tax | AMT |
|---|---|---|---|---|---|
| Tech worker, single, $220,000 taxable, $150,000 ISO spread | $386,100 | $90,100 | $77,990 | $46,856 | $31,134 |
| Same worker, ISO exercise split over two years ($75,000) | $311,100 | $90,100 | $57,460 | $46,856 | $10,604 |
| High-tax family, joint, $400,000 taxable, $40,400 SALT | $440,400 | $140,200 | $79,166 | $81,196 | $0 |
| Retiree, joint, $150,000 taxable, $60,000 private activity bond interest | $242,200 | $140,200 | $26,520 | $22,424 | $4,096 |
| Single, $700,000 taxable, itemized $40,400 SALT (exemption phased out) | $740,400 | $0 | $202,422 | $214,957 | $0 |
Splitting the ISO exercise across two years cuts this year’s AMT sharply because more of the spread stays inside the gap between regular tax and tentative minimum tax. The high-SALT family owes no AMT because the $40,400 cap limits the add-back. Above the phase-out the exemption vanishes, but a high earner’s regular tax at 35% to 37% usually still exceeds 28% of AMTI.
Since 2018 few households owe AMT. The main triggers are exercising incentive stock options and holding the shares, large private activity bond interest, and large itemized tax deductions with income in the phase-out range. Starting in 2026, the lower phase-out thresholds pull more incomes between $500,000 and $1 million (single) into reach, especially with ISOs.
AMT caused by timing items such as the ISO spread creates a minimum tax credit (Form 8801) that you can use in later years when regular tax exceeds tentative minimum tax, typically the year you sell the shares. AMT from exclusion items, such as the SALT or standard deduction add-back, does not create a credit.
It applies ordinary rates only; with qualified dividends or long-term gains, Form 6251 Part III taxes them at the capital-gain rates, which can lower the AMT. It does not model the AMT foreign tax credit, the minimum tax credit carryforward, different AMT basis for later sales, or estates and trusts. With an ISO exercise in a high-income year, a tax professional can plan how many shares to exercise before December 31.
Forgetting the standard-deduction add-back. Non-itemizers add it back too. Counting ISO shares sold in the same year. A same-year sale is a disqualifying disposition taxed as wages, with no AMT adjustment. Using 2025 thresholds. The phase-out now starts at $500,000 / $1,000,000 and runs twice as fast. Ignoring the credit: track AMT from ISOs on Form 8801 to recover it later.