Key Takeaways

• The OBBBA changes the AMT landscape starting in 2026, meaning more taxpayers will be pulled into AMT territory.
   
• High earners in high-tax states (and those with ISOs or private activity bonds) are the most at risk of an unexpected AMT bill.
   
• Strategic year-end 2025 planning (such as accelerating income or adjusting stock option timing) can help reduce your exposure.

 

I want to introduce you to someone: Your regular taxes’ less friendly cousin, the Alternative Minimum Tax.

For years, most people didn’t have to worry much about the AMT, thanks to higher exemption thresholds under the 2017 Tax Cuts and Jobs Act. But starting in 2026, because of the One Big Beautiful Bill Act, that’s about to change for a significant number of taxpayers (as the bill currently stands).

So, let’s unpack it. What’s Alternative Minimum Tax, and how could it cost you if you’re not paying attention?

 

What’s Alternative Minimum Tax?

At its core, the Alternative Minimum Tax is a parallel tax system designed to make sure higher-income taxpayers can’t use too many deductions, credits, or exclusions to shrink their federal tax bill to little (or nothing).

It’s basically the IRS’s way of saying, “Let’s double-check that you’re paying at least your fair share.” 

You essentially have to calculate your taxes twice (once under the standard tax rules and again under a stricter set of AMT rules) and then pay whichever amount is higher.

 

Does the OBBBA mean I have to pay Alternative Minimum Tax?

The OBBBA tweaked the AMT in a way that could reintroduce risk for your tax situation if you fall into that category.

Here’s what’s changing in 2026:

• Lower phaseout thresholds: Before, it was $626,350 (single) and $1,252,700 (joint). In 2026, we’ll be looking at $500,000 (single) and $1,000,000 (joint).
   
• Faster phaseout rate: Will be $0.50 per dollar of income above the threshold (up from $0.25 per dollar)

These changes mean the AMT exemption will disappear much faster as your income climbs.

Which means more taxpayers in the $500K–$700K range (and even some just under that) will get hit with a significantly higher effective marginal rate.

 

Which Alternative Minimum Tax triggers should I be watching?

So, what actually pushes you into AMT territory? 

1. State and Local Taxes (SALT). Under AMT rules, SALT deductions are completely disallowed. Which creates a big mismatch if you’re in a high-tax state like California, New York, or New Jersey.
    
2. Incentive Stock Options (ISOs). If you've exercised ISOs but held onto the stock, the bargain element (Fair Market Value minus the Exercise Price) counts as income for AMT purposes. This is “phantom income.” You could owe thousands in AMT even if you haven't sold a single share. 
    
3. Private Activity Bonds. Interest from certain municipal bonds is tax-free under the normal system, but under the AMT, it’s taxable. For retirees and investors holding a large portfolio of these bonds, this can easily trigger AMT liability.

Honorable mentions: accelerated depreciation, gains excluded from Qualified Small Business Stock, or large miscellaneous deductions or business expense adjustments.

 

How should I plan for Alternative Minimum Tax changes in 2026?

Here’s what smart taxpayers (with guidance from their favorite Richmond county tax pro… ahem) are doing right now:

1. Run AMT projections for 2026. You can’t rely on last year’s numbers. Tax software or a professional model can show whether you’ll be in the AMT “bump zone.”
    
2. Accelerate income into 2025. If you're likely to cross the AMT threshold in 2026, consider recognizing more income in 2025 through bonuses, capital gains, or stock sales (potentially locking in lower rates).
    
3. Manage your ISOs strategically. Don’t exercise large blocks without modeling the AMT impact. You might need to sell shares within the same calendar year to prevent AMT inclusion. 
    
4. Review bond portfolios. If you hold private activity bonds, reevaluate their after-tax return under AMT rules.

 

FAQs

“What income level triggers the AMT under the OBBBA?”

Starting in 2026, the AMT exemption begins to phase out around $500,000 (single) and $1,000,000 (joint). But depending on deductions and stock options, some taxpayers below these amounts could still be affected.

“Can I still deduct my state taxes if I’m subject to AMT?”

No. The AMT disallows all SALT deductions, even though the regular tax allows up to about $40,000 under the OBBBA.

“How do I know if I’ll owe AMT in 2026?”

You’ll need to run a projection comparing your regular tax vs. your tentative minimum tax (TMT) on Form 6251. Most tax professionals can simulate this for you (and we’ll do it gladly).

“Are stock options always bad for AMT?”

Not necessarily, but timing is critical. Exercising ISOs and holding the stock can trigger AMT. Selling within the same year can help avoid it.

“Is there a way to recover AMT paid in a prior year?”

Yes. The Minimum Tax Credit (MTC) allows you to offset regular tax in future years when timing differences reverse.

“How can a tax professional help me avoid AMT?”

We can model your AMT exposure, time income, and deductions properly, and help you avoid or minimize the AMT’s impact through proactive strategy.

 

The OBBBA has turned the AMT from a back-burner issue into a serious planning concern if you’re in a high-income household. This also applies to stock-compensated employees and residents of high-tax states.

If you think you might fall into one of these groups, or if you’re close to the thresholds (or you’re still scratching your head wondering, “what’s Alternative Minimum Tax?”), now is the time to prepare.

Don’t wait until April to find out you’ve been “AMT-ed.” Let’s model your exposure and plan your strategy:

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