Tax preference item

A tax preference item is a form of income that may trigger the imposition of the alternative minimum tax (AMT). This type of income does not normally have an income tax applied to it. The amount of these items is added back to taxable income when calculating the AMT, to ensure that high-income taxpayers who benefit from them will at least pay some minimum amount of tax. Examples of tax preference items are:

  • Excess intangible drilling costs
  • Interest on special private-activity municipal bonds
  • The qualifying exclusion for small business stock