AMT exemption increases permanently in 2026

Save up to $15,000 annually with permanent AMT exemption relief starting in 2026

The One Big Beautiful Bill Act delivers game-changing Alternative Minimum Tax relief for 2026 and beyond by making enhanced AMT exemptions permanent. For married couples filing jointly, the AMT exemption for 2026 remains at approximately $133,300, preventing a scheduled drop to just $104,800 that would have cost middle-income families thousands in additional taxes.

This legislative victory affects an estimated 5.1 million taxpayers who would have been subject to AMT under expired provisions. The permanent AMT exemption increase in 2026 means you can now build long-term tax strategies without worrying about sunset provisions eliminating your benefits.

Key takeaways for 2026:

• AMT exemptions stay at enhanced 2025 levels (~$85,700 single / ~$133,300 married)
• Phase-out thresholds remain high (~$609,350 single / ~$1,218,700 married)
• New 50% phase-out rate accelerates exemption reduction for high earners
• Annual inflation adjustments continue with 2025 as the base year
• Taxpayers save between $3,000 and $15,000+ annually compared to expired provisions

Understanding permanent AMT exemption amounts for 2026

The Alternative Minimum Tax exemption 2026 transforms from temporary relief to a permanent feature of the tax code. The AMT operates as a parallel tax system requiring you to calculate taxes twice—once under regular tax rules and once under AMT rules—then pay whichever amount is higher.

Permanent exemption levels

2026 AMT exemption comparison

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Phase-out thresholds by filing status

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These amounts will increase annually based on inflation using 2025 as the base year, ensuring your exemption maintains purchasing power over time.

Key legislative changes

The One Big Beautiful Bill Act implements three critical changes:

1. Permanent exemption structure eliminates sunset uncertainty after 2025
2. 50% phase-out rate (increased from 25%) accelerates exemption reduction for high earners
3. The 2025 inflation base year replaces the 2017 base, slightly slowing future growth

Calculate your specific 2026 AMT savings

Understanding your AMT tax savings for 2026 requires analyzing how permanent exemptions interact with your Alternative Minimum Taxable Income.

Quick savings reference by income level

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Quick savings reference by income level (Single)

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Middle-income married couple example

Scenario: California couple with $250,000 income and $22,000 state taxes

With permanent 2026 exemption:

• AMTI: $250,000
• AMT exemption: $133,300 (no phase-out at this income)
• Taxable for AMT: $116,700
• AMT tax: $30,342
• Regular tax: $35,180
• Result: No AMT owed (regular tax higher)

Without permanent exemption:

• AMT exemption: $104,800 (expired provision)
• Taxable for AMT: $145,200
• AMT tax: $37,752
• Result: AMT of $2,572 owed

Annual savings: $2,572

High-income single filer with phase-out

Scenario: Professional with $650,000 AMTI

With permanent exemption:

• Amount over threshold: $40,650
• Exemption reduction at 50%: $20,325
• Remaining exemption: $65,375
• Saves $4,788 annually vs. expired provision

Understanding the new 50% phase-out rate

The 50% AMT phase-out rate creates significant planning considerations for high-income taxpayers.

Phase-out mechanics

Phase-out rate comparison

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Income triggering complete exemption loss:

• Married: ~$1,485,300 AMTI (versus $1,752,500 under old 25% rate)
• Single: ~$785,900 AMTI (versus $952,150 under old 25% rate)

Strategic responses

Income timing:

• Spread large bonuses or stock sales across multiple years
• Defer income in high-earning years to preserve the exemption
• Accelerate deductions into phase-out years

Retirement contributions:

• Maximize Traditional 401k ($23,000 in 2024, $30,500 if 50+)
• Contributions reduce both regular income and AMTI
• Consider additional catch-up contributions near phase-out

Investment management:

• Use Tax loss harvesting to offset capital gains
• Time investment sales to avoid concentration
• Consider tax-exempt municipal bonds (excluding private activity bonds)

State tax implications of federal AMT relief

While the One Big Beautiful Bill Act provides permanent federal AMT relief in 2026, state tax situations vary.

States with separate AMT

California, Minnesota, and Iowa maintain their own AMT systems with different exemption amounts that may not automatically conform to federal increases. These states require separate calculations and planning strategies.

States conforming to the federal AMT

New York, New Jersey, and Pennsylvania generally adopt federal tax law changes, meaning permanent exemption increases flow through to state calculations automatically.

High-tax state opportunities

For taxpayers in California, New York, New Jersey, and Connecticut, federal exemption increases provide more capacity to absorb state and local tax deduction disallowances. The permanent federal relief creates valuable planning opportunities despite high state tax burdens.

Business owner optimization strategies

Business owners face unique AMT considerations in 2026 that interact with permanent exemption increases.

Pass-through entity planning

S Corporations and Partnerships pass income to owners where it faces AMT:

• Coordinate K-1 income timing with personal deductions (see IRS Publication 541)
• Structure distributions to manage AMTI relative to thresholds
• Combine with the Qualified Business Income deduction for maximum benefit

Equipment depreciation strategies

Enhanced Depreciation and amortization create AMT adjustments (see IRS Publication 946). Permanent exemptions provide more cushion for accelerated depreciation methods while managing overall tax impact.

Business expense coordination

Home office (see IRS Publication 587), Meals deductions, and Travel expenses (see IRS Publication 463) reduce both regular tax and Alternative Minimum Taxable Income without creating preference adjustments, making them particularly valuable under a permanent exemption structure.

Investment and retirement planning strategies

Traditional 401k versus Roth 401k

Traditional 401k provides immediate AMTI reduction, particularly valuable when approaching phase-out thresholds.

Roth 401k offers no current deduction but creates tax-free retirement income under both the regular and AMT systems.

Choose Traditional when: Your AMTI is approaching the phase-out range, or you expect lower retirement tax rates.

Choose Roth when: You're well below AMT thresholds or expect higher future rates

Health savings account optimization

Health savings account contributions provide a triple tax benefit:

• Deductible contribution reducing AMTI
• Tax-free growth
• Tax-free qualified withdrawals

2024 limits: $4,150 individual / $8,300 family / $1,000 age 55+ catch-up (see IRS Publication 969)

Investment income management

Time capital gains recognition is strategically to manage AMTI levels. Use Tax loss harvesting to offset gains and reduce Alternative Minimum Taxable Income while maintaining investment portfolio allocation.

Family tax planning opportunities

Child tax credit coordination

Child & dependent tax credits reduce both regular tax and AMT. Permanent exemptions increase the number of families that can claim the full credit value without AMT limitations, reducing the benefit.

Example: A family with 3 children saves an additional $1,500+ annually by avoiding AMT, which would have reduced the utilization of nonrefundable credits.

Education and children's income planning

529 plan contributions create no AMT issues, while Child traditional IRA contributions for children with earned income provide additional family tax benefits under a permanent exemption structure (see IRS Publication 590-A).

Real estate strategies

Augusta rule implementation

The Augusta rule allows homeowners to rent homes to their businesses for up to 14 days annually:

• Rental income is excluded from personal return (no AMTI impact)
• Business deducts rental expense
• Can generate $7,000+ in tax-free income annually

Example: Rent home at $500/day for 14 days = $7,000 excluded income + $7,000 business deduction = $2,500+ net tax benefit

Rental property depreciation

Coordinate depreciation methods with AMT impact analysis. Permanent exemptions provide confidence for long-term real estate investment strategies, including cost segregation studies.

Common mistakes to avoid

Mistake 1: Ignoring AMT in planningCalculate both regular tax and AMT for all major financial decisions. Failing to run parallel calculations costs $3,000-$15,000+ annually.

Mistake 2: Concentrating incomeSpread stock option exercises, capital gains, and bonuses across multiple years to preserve exemption benefits and avoid accelerated phase-out.

Mistake 3: Overlooking state implicationsResearch your state's conformity to federal AMT changes. Separate state calculations may be required.

Mistake 4: Underutilizing AMT-friendly deductionsMaximize Traditional 401k, HSA, home office, and business deductions that reduce both regular tax and AMTI.

2026 AMT planning action items

Immediate actions:

1. Calculate your 2026 Alternative Minimum Taxable Income projection
2. Review whether you're approaching exemption phase-out thresholds
3. Maximize Traditional 401k contributions before year-end
4. Implement year-end tax loss harvesting

Quarterly reviews:

1. Monitor AMTI progression throughout the year
2. Adjust estimated tax payments if needed (see IRS Publication 505)
3. Coordinate income recognition timing
4. Review investment portfolio for tax optimization

Annual planning:

1. Calculate 3-5 year AMTI projections
2. Develop multi-year income smoothing strategies
3. Review entity structure for business owners
4. Coordinate retirement distribution planning

Transform your tax planning with permanent AMT relief

The One Big Beautiful Bill Act's permanent AMT exemption delivers unprecedented relief starting in 2026. Don't miss the opportunity to optimize your strategy and save $3,000 to $15,000+ annually.

Instead's comprehensive tax platform automatically calculates both regular tax and AMT under various scenarios, helping you identify optimal income timing, deduction strategies, and investment decisions. Instead's intelligent system tracks permanent exemption benefits while coordinating with all other One Big Beautiful Bill Act provisions.

Get started with Instead today to maximize your 2026 AMT exemption benefits. Explore Instead's pricing plans to find the right solution for your tax planning needs.

Frequently asked questions about 2026 AMT exemptions

Q: How much will the permanent AMT exemption increase save me annually in 2026?

A: Savings range from $3,000 to $15,000+, depending on your income and filing status. Married couples with $200,000-$400,000 income typically save $2,500-$7,500. Single filers with income between $100,000 and $250,000 save $1,500- $5,000. High-income taxpayers approaching phase-out thresholds save $10,000-$15,000 through strategic planning. An estimated 5.1 million taxpayers benefit from avoiding AMT under permanent exemptions.

Q: Does the 50% phase-out rate mean I'll pay more AMT at high income levels?

A: The faster 50% phase-out (up from 25%) means your exemption disappears more quickly above thresholds. Married couples lose the complete exemption at an AMTI of ~$1,485,300, down from $1,752,500 previously. However, the permanent base exemption increase ($133,300 vs. $104,800) provides much greater benefit than the phase-out acceleration costs for most taxpayers.

Q: How do traditional 401k contributions affect my 2026 AMT exemption?

A: Traditional 401k contributions reduce both regular taxable income and Alternative Minimum Taxable Income dollar-for-dollar. For 2024, you can contribute $23,000 ($30,500 if 50+), directly reducing AMTI and helping preserve exemption benefits. If you're near the $1,485,300 complete phase-out (married), maximizing 401k contributions keeps you further from that threshold.

Q: Will my state automatically adopt federal AMT exemption increases?

A: It depends on your state. New York and New Jersey generally conform to federal AMT provisions automatically. However, California, Minnesota, and Iowa have separate state AMT systems that may not change. Always check your state's conformity status and calculate state AMT separately if applicable.

Q: Do permanent AMT exemptions increase annually for inflation?

A: Yes, exemption amounts and phase-out thresholds adjust annually for inflation starting in 2026. The One Big Beautiful Bill Act uses 2025 as the inflation base year (versus 2017 previously), slightly slowing future increases. However, annual adjustments ensure exemptions maintain real value over time.

Q: Who should prioritize AMT planning for 2026?

A: Focus on AMT planning if you: (1) have income between $200,000-$1,500,000 (married) or $100,000-$800,000 (single), (2) pay significant state and local taxes over $10,000, (3) exercise incentive stock options, (4) earn private activity bond interest, or (5) live in high-tax states like California, New York, New Jersey, or Connecticut.

Q: Can business owners benefit from permanent AMT exemptions?

A: Absolutely. Business owners with pass-through income from S Corporations or Partnerships benefit significantly because enhanced exemptions provide more capacity to receive business income without triggering AMT. When coordinated with QBI deductions, Traditional 401k contributions, and Home office deductions under the One Big Beautiful Bill Act, business owners save $5,000-$20,000+ annually.