ExamFinch.com My Study

Study guide

8.2 Alternative Minimum Tax (AMT)

Practice this exam

Enrolled Agent EA

Track your progress as you read

Finished sections get a check mark.

1 Part 1, Chapter 1: Tax Return Basics & Filing Requirements

1.1 Form 1040 Overview & Structure 1.2 Form 1040-SR for Seniors 1.3 Who Must File (Income Thresholds) 1.4 Filing Deadlines & Extensions (Form 4868) 1.5 Penalties: Failure to File vs. Failure to Pay 1.6 Sources of Tax Information (W-2s, 1099s, K-1s) 1.7 Preparer Due Diligence Requirements 1.8 Amended Returns (Form 1040-X)

2 Part 1, Chapter 2: Filing Status & Dependents

2.1 Single & Married Filing Jointly 2.2 Married Filing Separately 2.3 Head of Household Requirements 2.4 Qualifying Surviving Spouse 2.5 Qualifying Child Test (5 Tests) 2.6 Qualifying Relative Test (4 Tests) 2.7 SSN, ITIN & Residency Status

3 Part 1, Chapter 3: Wages & Employee Compensation

3.1 W-2 Income & Withholding 3.2 Employee vs. Independent Contractor 3.3 1099-NEC, 1099-MISC & 1099-K Reporting 3.4 Fringe Benefits (Taxable vs. Non-Taxable) 3.5 Stock Options (ISO vs. NQSO) 3.6 Special Categories (Clergy, Military, Foreign)

4 Part 1, Chapter 4: Interest, Dividends & Other Income

4.1 Taxable vs. Tax-Exempt Interest 4.2 US Savings Bonds & OID 4.3 Ordinary vs. Qualified Dividends 4.4 Schedule B Requirements 4.5 Rental & Royalty Income Basics 4.6 Alimony, Gambling & Other Income 4.7 Cancelled Debt & Form 1099-C 4.8 Net Operating Loss (NOL)

5 Part 1, Chapter 5: Capital Gains & Property Transactions

5.1 Capital vs. Non-Capital Assets 5.2 Cost Basis Calculation 5.3 Inherited & Gifted Property Basis 5.4 Short-Term vs. Long-Term Gains 5.5 Capital Gains Tax Rates (0%, 15%, 20%) 5.6 Netting & the $3,000 Loss Limit 5.7 Wash Sales & Related Party Rules 5.8 Sale of Primary Residence (Section 121) 5.9 Installment Sales (Form 6252) 5.10 Like-Kind Exchanges (Section 1031)

6 Part 1, Chapter 6: Adjustments to Income

6.1 Educator Expenses & HSA Contributions 6.2 Self-Employment Tax Deduction 6.3 IRA Contributions (Traditional) 6.4 Student Loan Interest Deduction 6.5 Alimony Paid (Pre-2019 Divorces) 6.6 Other Adjustments & New OBBBA Deductions (Tips, Overtime, Auto Loan, Senior Bonus)

7 Part 1, Chapter 7: Deductions (Standard & Itemized)

7.1 Standard Deduction by Filing Status 7.2 Medical & Dental Expenses (7.5% Floor) 7.3 State & Local Taxes (SALT $40K Cap) 7.4 Mortgage Interest Deduction 7.5 Charitable Contributions 7.6 Casualty & Theft Losses 7.7 QBI Deduction (Section 199A)

8 Part 1, Chapter 8: Tax Calculation & Credits

8.1 Tax Tables & Rate Schedules 8.2 Alternative Minimum Tax (AMT) 8.3 Self-Employment Tax Calculation 8.4 Child Tax Credit & Additional CTC 8.5 Earned Income Tax Credit (EITC) 8.6 Education Credits (AOC & LLC) 8.7 Child & Dependent Care Credit 8.8 Other Credits (Saver's, Premium Tax)

9 Part 1, Chapter 9: Retirement Accounts & Social Security

9.1 Traditional vs. Roth IRA 9.2 401(k), 403(b) & TSP Basics 9.3 SEP-IRA & SIMPLE IRA 9.4 Required Minimum Distributions (RMDs) 9.5 Early Withdrawal Penalties & Exceptions 9.6 Social Security Taxation

10 Part 1, Chapter 10: Specialized Individual Returns

10.1 Estate Tax (Form 706) 10.2 Gift Tax (Form 709) 10.3 Foreign Income (Form 2555) 10.4 FBAR & FATCA Reporting 10.5 Farm Income (Schedule F) 10.6 Disaster Area Rules

11 Part 2, Chapter 11: Business Entity Types

11.1 Overview of Entity Types 11.2 State Law vs. Tax Classification 11.3 Entity Selection: Reasonable Comp & QBI 11.4 Form 8832 & Rev. Proc. 2009-41 11.5 LLC Deep Dive: Spouses & EINs 11.6 Changing Status: The 60-Month Rule

12 Part 2, Chapter 12: Starting a Business

12.1 Hobby vs. Business (Profit Motive) 12.2 Employer Identification Number (EIN) 12.3 Tax Year Selection 12.4 Recordkeeping Requirements 12.5 Statute of Limitations 12.6 Related Party Transactions 12.7 Start-Up Costs, Entity Choice & OBBBA Business Changes (2025)

13 Part 2, Chapter 13: Worker Classification & Payroll

13.1 Employee vs. Independent Contractor 13.2 Common Law Test (Behavioral, Financial, Relationship) 13.3 Statutory Employees & Non-Employees 13.4 Form 941 & Payroll Deposits 13.5 Trust Fund Recovery Penalty 13.6 FUTA & Unemployment Taxes

14 Part 2, Chapter 14: Accounting Methods & Income

14.1 Cash vs. Accrual Method 14.2 Hybrid Methods & Changes 14.3 Inventory & COGS 14.4 Gross Receipts & Income Recognition 14.5 Constructive Receipt 14.6 Form 1099 Reporting Requirements 14.7 §163(j) Business Interest Expense Limitation 14.8 §174 Research & Experimental Expenditures

15 Part 2, Chapter 15: Depreciation & Asset Treatment

15.1 MACRS Basics & Recovery Periods 15.2 Mid-Month, Mid-Quarter, Half-Year Conventions 15.3 Section 179 Expense Deduction 15.4 Bonus Depreciation 15.5 Listed Property Rules 15.6 Amortization of Intangibles 15.7 Depletion 15.8 Disposition of Business Assets

16 Part 2, Chapter 16: Business Deductions

16.1 Ordinary & Necessary Test 16.2 Business Travel Expenses 16.3 Business Meals (50% Limitation) 16.4 Business Use of Vehicle 16.5 Home Office Deduction 16.6 Business Interest Limitation (163(j)) 16.7 Business Bad Debts

17 Part 2, Chapter 17: Business Credits & Fringe Benefits

17.1 General Business Credit Overview 17.2 R&D Credit & Disabled Access Credit 17.3 Small Employer Health Insurance Credit 17.4 Fringe Benefit Rules 17.5 Cafeteria Plans (Section 125) 17.6 Achievement Awards & Other Benefits

18 Part 2, Chapter 18: Sole Proprietorships

18.1 Schedule C Overview 18.2 Calculating Net Profit/Loss 18.3 Self-Employment Tax (Schedule SE) 18.4 Estimated Tax Payments 18.5 Hobby Loss Rules

19 Part 2, Chapter 19: Partnerships

19.1 Partnership Formation 19.2 Partner's Basis Calculation 19.3 Form 1065 Overview 19.4 Schedule K-1 (Partner's Share) 19.5 Guaranteed Payments 19.6 Partnership Distributions 19.7 At-Risk & Passive Activity Rules 19.8 Partnership Termination & Liquidation

20 Part 2, Chapter 20: C Corporations

20.1 Form 1120 Overview 20.2 Corporate Tax Rate (21%) & CAMT 20.3 Accumulated Earnings Tax 20.4 Dividends Received Deduction 20.5 Earnings & Profits (E&P) 20.6 Corporate Distributions, Dividends & Stock Redemptions 20.7 §351 Transfers, §1032, §1202 QSBS & Other Corporate Provisions 20.8 Corporate Liquidation

21 Part 2, Chapter 21: S Corporations

21.1 S Election Requirements (Form 2553) 21.2 Form 1120-S Overview 21.3 Shareholder Basis Calculation 21.4 Reasonable Compensation 21.5 S Corporation Distributions 21.6 Built-In Gains Tax & Termination

22 Part 2, Chapter 22: Specialized Business Returns

22.1 Trusts & Estates (Form 1041) 22.2 Simple vs. Complex Trusts 22.3 Distributable Net Income (DNI) 22.4 Tax-Exempt Organizations (Form 990) 22.5 Retirement Plans (Form 5500) 22.6 Qualified Retirement Plans Overview 22.7 Farm Taxation 22.8 Rental Real Estate Activities

23 Part 3, Chapter 23: Practice Before the IRS

23.1 What is Practice Before the IRS? 23.2 Who Can Practice (Full Rights) 23.3 Limited Practice Rights (AFSP, Unenrolled) 23.4 Special Relationships (Family, Employees) 23.5 PTIN Requirements 23.6 Circular 230 Overview 23.7 Office of Professional Responsibility (OPR)

24 Part 3, Chapter 24: Becoming & Maintaining EA Status

24.1 Two Paths to EA (Exam vs. IRS Experience) 24.2 Application Process (Form 23) 24.3 Background & Compliance Checks 24.4 Renewal Requirements (Form 8554) 24.5 Continuing Education Requirements 24.6 Inactive Status & Termination

25 Part 3, Chapter 25: Practitioner Duties (Circular 230)

25.1 Due Diligence Requirements 25.2 Knowledge of Client's Omission 25.3 Conflict of Interest Rules 25.4 Fee Requirements (Contingent, Unconscionable) 25.5 Advertising & Solicitation Rules 25.6 Tax Return Position Standards 25.7 Written Advice Standards 25.8 Sanctions & Penalties for Violations

26 Part 3, Chapter 26: Power of Attorney & Authorization

26.1 Form 2848 (Power of Attorney) 26.2 CAF (Centralized Authorization File) 26.3 Form 8821 (Tax Information Authorization) 26.4 Third-Party Designee 26.5 Signing Returns for Taxpayers 26.6 Client Confidentiality & Privilege 26.7 Representing Clients in Audits (Examination) 26.8 Appealing IRS Decisions 26.9 Collection Representation

27 Part 3, Chapter 27: Legal Authority & Research

27.1 Hierarchy of Tax Authority 27.2 Internal Revenue Code 27.3 Treasury Regulations 27.4 Revenue Rulings & Procedures 27.5 Court Cases & Precedent 27.6 Statutes of Limitations

28 Part 3, Chapter 28: Specific Representation Issues

28.1 Trust Fund Recovery Penalty (TFRP) 28.2 Innocent Spouse Relief (Form 8857) 28.3 Injured Spouse Allocation (Form 8379) 28.4 Penalty Abatement (FTA & Reasonable Cause) 28.5 Taxpayer Advocate Service (TAS) 28.6 Freedom of Information Act (FOIA)

29 Part 3, Chapter 29: Final Review & Exam Strategy

29.1 Exam Structure & Logistics (2026-2027) 29.2 The "Clock" of Representation (Master Deadlines) 29.3 Ethics vs. Law (Sanctions & Penalties) 29.4 Final Mock Review & Exam Strategy

30 Part 3, Chapter 30: Filing Process & E-File

30.1 E-File Requirements (The "More Than 10 Returns" Rule) 30.2 ERO Responsibilities 30.3 EFIN & Application Process 30.4 Form 8879 (Signature Authorization) 30.5 Record Retention & Data Security (WISP) 30.6 Preparer Penalties (Filing Specific)

8.2 Alternative Minimum Tax (AMT)

Key Takeaways Explain This Topic AI

AMT is a parallel tax system — taxpayers compute tax under both regular and AMT rules and pay the higher amount (regular tax + any AMT excess)

2025 AMT exemptions: $88,100 Single/HoH; $137,000 MFJ/QSS; $68,500 MFS; $30,700 Estates/Trusts

Exemptions phase out at 25 cents per $1 of AMTI above the threshold: $626,350 Single/HoH/MFS; $1,252,700 MFJ; $102,500 Estates/Trusts

AMT rates: 26% on AMTI up to $239,100 ($119,550 MFS); 28% above that. Preferential 0%/15%/20% LTCG and qualified dividend rates still apply under AMT at the same thresholds as regular tax

OBBBA permanently extended the higher TCJA AMT exemptions and phase-outs — no AMT exemption reversion to pre-TCJA levels after 2025

Last updated: October 2026

The Alternative Minimum Tax is a core individual-tax topic on the EA SEE. The One Big Beautiful Bill Act (OBBBA) , signed July 4, 2025, made the higher TCJA AMT exemption amounts and phase-out thresholds permanent , ending the previously scheduled post-2025 reversion to pre-TCJA levels.

What Is the AMT?

The Alternative Minimum Tax is a parallel tax system that runs alongside the regular income tax. It ensures taxpayers benefiting from large itemized deductions, ISO exercises, or other preference items still pay a minimum federal tax.

How it works: Compute tax twice:

  • Regular income tax
  • AMT (with preferences added back and a single AMT exemption applied)

If tentative minimum tax exceeds regular tax, the excess is owed as AMT (in addition to regular tax) and reported on Form 6251 → Schedule 2, Line 1 → Form 1040, Line 17 .

Why Does AMT Exist?

Congress enacted the AMT in 1969 after learning 155 high-income individuals had paid zero federal income tax through legal deductions. Over decades, AMT expanded to capture millions of middle-class taxpayers — particularly in high-SALT states — until TCJA (2018) raised exemptions sharply. OBBBA has now locked those higher exemptions in permanently.

2025 AMT Exemption Amounts

  • Filing Status AMT Exemption
  • Single $88,100
  • Head of Household $88,100
  • Married Filing Jointly / QSS $137,000
  • Married Filing Separately $68,500
  • Estates and Trusts $30,700

EA Exam Tip: MFS exemption is exactly half of MFJ ($68,500 vs. $137,000). Single and HoH share the same exemption.

2025 AMT Exemption Phase-Out

The exemption is reduced by 25¢ per $1 of AMTI above the threshold.

  • Filing Status Phase-Out Begins Exemption Fully Gone At
  • Single / HoH $626,350 $978,750
  • MFJ / QSS $1,252,700 $1,800,700
  • Married Filing Separately $626,350 $900,350
  • Estates and Trusts $102,500 $225,300

Example: A single taxpayer with AMTI of $700,000 exceeds the threshold by $73,650 ($700,000 − $626,350). Their exemption is reduced by $18,412.50 ($73,650 × 25%), leaving an exemption of $69,687.50 ($88,100 − $18,412.50).

2025 AMT Tax Rates

  • AMTI Above Exemption AMT Rate
  • Up to $239,100 ($119,550 MFS) 26%
  • Above $239,100 ($119,550 MFS) 28%

Calculation shortcut: If AMTI (after exemption) exceeds $239,100, multiply by 28% and subtract $4,782 ($2,391 MFS).

Preferential capital gains rates of 0%/15%/20% still apply for AMT purposes at the same 2025 thresholds as regular tax — net LTCG and qualified dividends are NOT taxed at 26%/28% AMT rates.

Common AMT Preference Items and Adjustments

When calculating AMTI, taxpayers must add back certain items that reduced regular taxable income.

Item AMT Treatment

State and Local Taxes (SALT) Not deductible for AMT — add back the full Schedule A SALT deduction (now up to the new $40,000 OBBBA cap for regular tax)

Miscellaneous 2% itemized deductions Were never allowed for AMT; OBBBA made the regular-tax suspension permanent

  • Standard Deduction Not allowed for AMT
  • Private Activity Bond Interest Generally taxable for AMT (add back)
  • Incentive Stock Options (ISOs) Bargain element (FMV − exercise price) is AMT income in year of exercise

Accelerated Depreciation Difference between accelerated and ADS straight-line is added back (note: 100% bonus depreciation under OBBBA generally has no AMT adjustment)

Net Operating Loss (NOL) AMT NOL is computed separately

ISO bargain element example: An employee exercises ISOs for 1,000 shares at $10/share when FMV is $50/share. The $40,000 bargain element (1,000 × $40) is added to AMTI even though there is no regular-tax consequence until sale.

  • Calculating Alternative Minimum Taxable Income (AMTI) Regular Taxable Income
  • + Standard Deduction (if claimed)
  • + SALT Deduction (Schedule A — including the OBBBA-raised cap)
  • + Private Activity Bond Interest
  • + ISO Bargain Element
  • + Depreciation Adjustment
  • + Other AMT preference items
  • − AMT-specific deductions
  • = Alternative Minimum Taxable Income (AMTI)
  • AMTI − AMT Exemption (after phase-out) = Taxable Excess
  • Taxable Excess × 26%/28% = Tentative Minimum Tax
  • Tentative Minimum Tax − Regular Tax = AMT (if positive)
  • Form 6251 Overview

Form 6251, Alternative Minimum Tax — Individuals has three parts:

  • Part I — AMTI
  • Line 1: Taxable income from Form 1040
  • Lines 2a–2t: AMT adjustments and preferences
  • Line 4: AMTI
  • Part II — Alternative Minimum Tax
  • Line 5: AMT exemption (after phase-out)
  • Line 6: Taxable excess
  • Line 7: Tentative minimum tax (26% / 28%)
  • Line 9: Regular tax liability
  • Line 11: AMT (excess of TMT over regular tax)
  • Part III — Tax Computation Using Maximum Capital Gains Rates
  • Preserves 0%/15%/20% rates on LTCG and qualified dividends under AMT

AMT flows to Schedule 2, Line 1 and then to Form 1040, Line 17.

Interaction with OBBBA SALT Cap Increase

OBBBA raised the regular-tax SALT cap to $40,000 ($20,000 MFS) for 2025 (was $10,000 / $5,000 under TCJA), phasing down by 30¢ per $1 of MAGI above $500,000 MFJ / $250,000 MFS to a $10,000 floor. Because SALT is still fully added back for AMT , taxpayers in high-tax states with large SALT deductions may see an AMT recalculation become relevant again — even though TCJA initially reduced AMT exposure.

EA Exam Tips for AMT

Know the 2025 exemption amounts — especially MFS = half of MFJ.

Phase-out rate is 25¢ per $1 of AMTI above the threshold.

Two rates: 26% / 28% , with the break at $239,100 ($119,550 MFS).

ISO bargain element is a perennial favorite — add to AMTI in year of exercise.

SALT is fully added back for AMT regardless of the OBBBA cap increase.

LTCG / QDI preferential rates also apply under AMT at the same thresholds.

AMT is permanent post-OBBBA — no scheduled reversion to pre-TCJA exemption levels.

AMT is reported on Schedule 2, Line 1 .