The Tax Cuts and Jobs Act of 2017 (TCJA) made some favorable changes to the alternative minimum tax (AMT) for individual taxpayers. While those changes reduced your risk of falling prey to the tax, they were scheduled to expire after 2025, absent congressional action.

In July 2025, Congress passed the new tax and spending law known as the One Big Beautiful Bill Act (OBBBA). While the TCJA’s AMT provisions are now permanent, the new law also tweaks the rules in some ways that could leave more taxpayers vulnerable to the tax, beginning in 2026. Many higher-income taxpayers are concerned about their exposure to the AMT under the new law. Here are answers to some common questions. 

Quick Takeaways:

• The AMT ensures higher-income taxpayers pay at least a minimum tax, calculated differently from regular income tax.
• TCJA changes reduced AMT exposure, but those relief measures shift under the OBBBA starting in 2026.
• OBBBA lowers exemption thresholds and doubles the phaseout rate, meaning more high-income taxpayers may be affected.
• Those with large capital gains, high state/local tax deductions, or incentive stock options face the greatest risk.

What’s the AMT?

The AMT was originally designed to ensure that higher-income taxpayers pay at least a minimum amount of taxes. Depending on your AMT taxable income, the AMT rate is 26% or 28%. For 2025, the higher rate kicks in when the taxable income exceeds $239,100 ($119,550 for married individuals filing separately).

AMT taxable income is calculated differently from regular taxable income for federal income tax purposes. AMT taxable income includes certain income that generally isn’t included in the latter and excludes some deductions. So, while the maximum AMT rate is less than the maximum income tax rate of 37%, the income base upon which the AMT is calculated is greater.

When you file your individual federal income tax return, you must calculate your tax liability under both the regular income tax and the AMT and pay the higher amount. The AMT liability is generally computed by adding about two dozen so-called “preference and adjustment items” to your regular taxable income. 

An AMT exemption is then deducted to produce your AMT taxable income. The exemption phases out as your income rises. Under current law, the exemption is reduced by 25% of the amount of your taxable income that exceeds the phaseout threshold.

How Did the TCJA Change the AMT Rules?

The TCJA made several taxpayer-friendly changes to the AMT. Notably, it increased the AMT exemption amounts and the income levels for the phaseout of the exemptions. 

For 2025, the exemption amount for unmarried individuals is $88,100 ($68,650 for married individuals filing separately) and begins to phase out at $626,350. For married couples filing jointly, the exemption amount is $137,000 and begins to phase out at $1,252,700.

Other TCJA provisions that were unfavorable from a federal income tax perspective also contributed to reducing the number of taxpayers affected by the AMT. Specifically, the law eliminated or decreased certain AMT adjustment items through 2025, including personal exemptions, itemized deductions for miscellaneous itemized expenses and home equity loan interest, and the limitation on itemized deductions for higher-income taxpayers.

How Does the OBBBA Alter the AMT Landscape?

Thanks to the TCJA, the estimated number of taxpayers that paid the AMT fell from more than 5 million in 2017 to just 200,000 in 2018. The OBBBA is likely to boost that number somewhat.

That’s because, while it makes the bigger exemptions permanent, the law also returns the exemption phaseout thresholds to the lower 2018 levels, beginning in 2026. The AMT phaseout thresholds will be $1 million for joint returns and $500,000 for other taxpayers, adjusted annually for inflation going forward. And the OBBBA doubles the rate at which the exemptions phase out to 50%. As a result, more high-income individuals may be hit with the AMT, starting in 2026.

In particular, you could be at risk if you:

• Have significant income from capital gains or private activity municipal bond interest,  
• Claim a large federal income tax deduction for state and local taxes, and/or
• Exercise incentive stock options. 

The number of taxpayers hit by the AMT isn’t expected to return to pre-TCJA levels, however. The exemptions and phaseout thresholds are still higher than under prior law. And the OBBBA permanently extends the TCJA provisions that eliminate or decrease certain AMT adjustment items, including personal exemptions and itemized deductions for miscellaneous itemized expenses and home equity loan interest. 

Beyond the AMT

The OBBBA includes numerous other tax provisions affecting both individuals and businesses. View our overview of key changes for businesses and individuals below:

• 2025 One Big Beautiful Bill Act Signed Into Law: What Tax Changes Mean for Individual Taxpayers
• 2025 Big Beautiful Bill Signed Into Law: What Tax Changes Mean for Business Owners