AMT Adjustments
In General
Per Code Sec. 56, in calculating alternative minimum taxable income (AMTI), a taxpayer must add or subtract amounts from regular taxable income due to the different treatment of certain tax items for AMT. These additions and subtractions are called AMT adjustments.
NOTE: Individual taxpayers in some cases must also increase regular taxable income due to the different treatment of certain other tax items for AMT purposes under Code Sec. 57. These increases, called AMT preferences, are discussed on the AMT Preferences page.
Some of the adjustment items are very common, while others only affect a small number of individual taxpayers. The items that are subject to adjustment for AMT for individual taxpayers include:
- Miscellaneous itemized deductions.
- Standard deduction.
- Certain state, local and foreign taxes.
- Certain interest (including home mortgage and investment interest).
- Incentive Stock Option (ISO) exercises
- Depreciation deduction.
- Mining exploration and development costs.
- Long-
term contract expenses. - Alternative tax net operating losses.
- Amortization deductions for pollution control facilities.
- Gain or loss on the disposition of property.
- Circulation expenses.
- Research and experimental expenses.
An individual taxpayer’s AMT adjustment items are added or subtracted in the calculation of AMTI on page 1 of Form 6251. These adjustments are discussed below.
Miscellaneous Itemized Deductions
Years before 2018: For years before 2018, the deduction for miscellaneous itemized deductions subject to the 2% of AGI floor (as defined in Code Sec. 67(b)) allowed for regular tax purposes is not allowed for the AMT. Therefore, in those years, an individual taxpayer must add back miscellaneous itemized deductions in calculating AMTI. The miscellaneous itemized deductions subject to the 2% of AGI floor include (but are not limited to):
- Unreimbursed employee business expenses.
- Tax return preparation fees.
- Expenses paid to collect or produce taxable income or to manage or protect property held to earn taxable income.
After 2018: The 2017 Tax Cuts and Jobs Act suspended the deduction for miscellaneous itemized deductions subject to the 2% of AGI floor (as defined in Code Sec. 67(b)) for the years 2018 through 2025, and the One Big Beautiful Bill Act of 2025 (the OBBBA) permanently eliminated the deduction. Therefore, for years after 2018, no AMT adjustment for miscellaneous itemized deductions is necessary
State, Local, and Foreign Taxes
No deduction is allowed in calculating AMTI for the taxes listed in Code Secs. 164(a) and 164(b)(5)(A). Therefore, an individual taxpayer must add back deductions for these taxes in calculating AMTI. These taxes include:
- State, local, and foreign income, war profits, and excise taxes.
- State, local, and foreign real property taxes.
- State and local personal property taxes.
- State, local, and foreign taxes paid or accrued in carrying on a trade or business or an activity for the production of income.
- State and local sales taxes deducted in lieu of income taxes.
The basic standard deduction and the additional standard deductions for the aged and the blind are not allowed for AMT.
An increased standard deduction due to a loss suffered in related to property in a federally declared disaster area is allowed for AMT. See the instructions to Form 6251, line 3, Other Adjustments, for more information.
Mortgage interest: Instead of the deduction for qualified residence interest (QRI) for the regular tax, a deduction is allowed for qualified housing interest for AMT.
QRI is interest on acquisition indebtedness, which is debt used in acquiring, constructing or substantially improving a qualified residence that is secured by that residence. A qualified residence is the taxpayer’s principal residence and one other residence selected by the taxpayer that the taxpayer uses as a personal residence.
QHI is interest is QRI that is used in acquiring, constructing, or substantially improving a principal residence within the meaning of Code Sec. 121 or a qualified dwelling which is a qualified residence.
A qualified dwelling for AMT is a house, apartment, condominium, or mobile home not used on a transient basis. A qualified dwelling for AMT doesn’t include house boats and recreational vehicles.
If home mortgage interest deducted on Schedule A for regular tax purposes by an individual taxpayer is attributable to a dwelling that isn’t a principal residence within the meaning of Code Sec. 121 or a qualified dwelling, the interest is not deductible QHI and must be added back in calculating AMTI
Investment interest: The difference between the regular tax deduction for investment interest and the AMT deduction for investment interest is an AMT adjustment.
For regular tax purposes, an individual taxpayer can deduct investment interest to the extent of his or her net investment income. A taxpayer also can deduct investment interest to the extent of net investment income for AMT purposes, but the amount deductible may be greater or smaller than the amount deductible for regular tax, because of the following differences in the AMT investment interest rules:
AMT items taken into account: In determining net investment income for AMT purposes, the taxpayer must take into account AMT adjustment items under Code Secs. 56, 57 and 58, as well as the preference for interest on specified private activity bonds.
Interest on debt used to purchase specified private activity bonds: Interest on borrowed funds used to purchase specified private activity bonds are investment interest for AMT, up to the amount of the interest earned on the bonds.
Mortgage interest: For regular tax purposes, investment interest does not include qualified residence interest (i.e., deductible home mortgage interest for regular tax purposes). For AMT purposes, investment interest does not include qualified housing interest (i.e., deductible home mortgage interest for regular tax purposes).
NOTE: For the regular tax and AMT, investment interest that a taxpayer cannot deduct in the current year due to the net investment income limitation can be carried forward and deducted (subject to the limitation) in the next tax year.
However, because of the difference in the investment interest rules for regular tax and AMT, a taxpayer’s carryforward amount may be different for regular tax and AMT.
For regular tax, under Code Section 421, a taxpayer that exercises an incentive stock option is not required to include the difference between the option price and the fair market value of the underlying stock at the time of exercise in income in the year of exercise. For AMT, this difference must be included in income in the year of exercise. Thus, the amount of the difference is an AMT adjustment added back in calculating AMTI.
NOTE: This adjustment does not apply if the taxpayer sells the stock received in the ISO exercise in the same tax year he or she exercises the ISO.
EXAMPLE: R exercises 100 ISOs in 2025 when the FMV of the stock underlying the options is $10 per share. R pays $5 per share when she exercises the ISOs. R does not recognize any income for regular tax in 2025 due to the exercise of the ISOs. In calculating AMTI, R must add back $500, the difference between the amount she paid when she exercised the ISOs and the FMV of the stock she receives.
For AMT purposes, a taxpayer adds the amount of the adjustment to the basis of the stock.
EXAMPLE: The facts are the same as in the preceding example. R has a regular tax basis of $500 in the stock she receives when she exercises the ISOs, the price she paid to exercise the options. Her AMT basis in the stock is $1000, the price she paid to exercise the options plus the amount of her AMT adjustment.
The difference in basis caused by the ISO adjustment will usually cause an AMT adjustment on the disposition of the stock in the year the stock is sold. The AMT adjustment for the disposition of property is discussed below.
See the instructions for Form 6251, line 2i, Exercise of Incentive Stock Options, for more information on the AMT adjustment for ISO exercises.
In general, unless a taxpayer elects to use the same method of calculating depreciation for regular tax and AMT on post-
In most cases, the differences in the depreciation rules for the two systems results in a greater depreciation deduction for a particular asset for regular tax in the earlier years of the asset’s recovery period and a lower deduction for regular tax in the later years. The difference between the aggregate amount of depreciation deductions for regular tax and for AMT is an adjustment that is added back or subtracted in the calculation of AMTI.
For a taxpayer that owns an interest in a partnership or shares in an S corporation, the K-
See the instructions for Form 6251, line 2l, Post-
The gain or loss recognized on the disposition of property may be different for regular tax and AMT because the property the taxpayer disposes of has a different basis for regular tax and AMT. This can occur for a number of reasons, including differences in depreciation deductions taken under the two systems for the property and in the case of stock received through the exercise of an ISO, the difference in basis caused by the ISO AMT adjustment discussed above.
Because basis may be higher or lower for regular tax than it is for AMT, this adjustment may be positive or negative. The taxpayer includes the adjustment in calculating AMTI.
See the instructions for Form 6251, line 2k, Disposition of Property, for more information on how to calculate the AMT adjustment for the disposition of property.
NOTE: It is important to remember that the $3,000 limitation on the deduction of capital losses that applies to individual taxpayers for regular tax also applies for AMT.
Amortization Expenses of Pollution Control Facilities, Circulation Costs, Long-
Except for adjustments passed through from partnerships, LLCs, and S corporations, these are all comparatively rare adjustments for individuals. More detail on these adjustments can be found in the instructions for Form 6251.
NOTE: If you own a sole proprietorship business and report any of these types of expenses on Schedule C, you should generally consult with a qualified tax professional when determining the amount of the AMT adjustment.
Need more help with the AMT adjustment rules?
Submit a question to the AMT Advisor.