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How to calculate the new alternative minimum tax under OBBBA

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11 months ago

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The alternative minimum tax represents one potential caveat to the widespread and, mostly, correct belief that the One Big Beautiful Bill Act cut everyone’s payments to Uncle Sam.

Below are five key questions for financial advisors, tax professionals and clients to help them understand their potential AMT exposure. OBBBA tweaked the rules in ways that will hike the number of households subject to it. 

The level of liability will not reach the days before the Tax Cuts and Jobs Act of 2017. However, the adjustments may prompt some clients to speed up their collection of certain income to this year, rather than waiting until it could bring higher taxes in 2026 or beyond.

For example, the rising deduction for state and local taxes under OBBBA will indeed reduce federal income liabilities in the traditional or basic system for households in high-tax areas in places like New York, Chicago and Los Angeles. But the AMT brings an alternative set of rules that add items like those hotly debated SALT breaks of up to $40,000 and the standard deduction back into a household’s income. So that means OBBBA’s rules could bring higher taxes for some households in those high-tax states, according to Ben Henry-Moreland, a former planner who’s a senior financial planning nerd with the Kitces.com blog.

“Having an unlimited SALT deduction prior to the TCJA meant that people who just lived in a higher-tax state often found themselves subject to the alternative minimum tax,” he said. “We’re going to see, I think, more people become subject to the AMT because of that than the actual changes to the AMT itself.”

READ MORE: Financial advisors are divided over this RMD tax strategy

The main new AMT payers

The SALT deductions, incentive stock option compensation and interest income from private activity bonds amount to the most common possible reasons that households could be newly eligible for the AMT next year, according to Henry-Moreland and Holly Swan, the head of wealth solutions in the global client strategy unit of asset management firm Allspring Global Investments. But the rules often prove complicated, to the point that Swan, who created a helpful checklist of AMT guidelines for advisors and clients, heard another tax pro comparing the AMT to a torpedo. They could already be causing changes to their plans for this tax year.

“We might see a lot of people who have ISOs wanting to exercise this year, so that they’re not opting into the new AMT regime,” Swan said. “And then we might see people who have favored private activity bonds, which can have higher interest rates, reconsidering that or just adjusting the math on how they look at the after-tax yield on those rates.”

No one can say for sure, though, by how much the roughly 150,000 to 250,000 households paying the AMT since the 2017 law will increase under OBBBA’s new rules. They just know that the number is much lower than in the absence of the megalaw, according to Garrett Watson, a senior policy analyst and modeling manager at the nonprofit, nonpartisan Tax Foundation.

“More people will fall into it than this year,” he said of the AMT. “There are more folks falling into the AMT next year than this year, although way fewer than there would have been, had the previous law expired.”

Scroll down the page to see five key questions for financial advisors, tax professionals and their clients to consider on the alternative minimum tax, or read the main feature story, “‘Stealth’ tax is back: An advisor primer on the alternative minimum tax.” For a look at how advisors can ensure they’re maintaining the boundary between tax guidance and tax advice, click here.

Got the glossary straight?

In addition to its wonky acronym, the AMT has spawned two other terms that do not apply to anything else in finance. 

The “tentative minimum tax payment” refers to a taxpayer’s potential liability under the AMT, and that number is “tentative” because they will only need to pay that amount if it turns out to be higher than their basic federal income tax. 

The other jargon revolves around “preference items,” which are deductions, credits and other tax incentives that households must add back to their income for purposes of the AMT. Some of the most common preference items are: the deduction for state and local taxes, incentive stock options, interest income from private activity bonds and the standard deduction.

What is the client’s AMT income?

To find their specific income under the AMT, clients must add those preference items back to their traditional income. Then they can calculate whether they are eligible for any exemptions.

READ MORE: Caps, credits, contributions: Tax planning for parents under OBBBA

What is the exemption, and what is the phaseout?

OBBBA’s boost of the state and local tax deduction will likely bring more households into the AMT’s purview, so they’ll need to understand their level of exemption and the level of income that causes the exemption to phase out at the upper income ranges.

In 2025, the first $88,100 for individuals and $137,000 for couples out of their income for AMT purposes is exempt. But that exemption phases out at 25 cents per dollar, starting at $626,350 for individuals and $1,252,700 for married households filing jointly. 

In 2026, inflation adjustments to the exemption will push the numbers up to $90,100 for single filers and $140,200 for couples. But the phaseout begins at lower levels — $500,000 for individuals and $1 million for spouses — and the exemption goes away twice as quickly, at 50 cents on the dollar above those levels of AMT income.

What is the client’s AMT liability?

Once the taxpayers have subtracted any exemptions from their AMT income, they can calculate how much of that will be subject to 26% or 28% rates.

For 2025, the first $119,550 of AMT income for single filers and the first $239,100 for couples will be taxed at 26%, with any other income getting hit at a 28% rate. In 2026, those numbers will go up to $122,250 for single filers and $244,500 for joint households.

If the client has received any foreign AMT tax credits, they will then reduce that amount of that credit from the resulting number to find their tentative AMT liability.

READ MORE: Using tax-aware long-short vehicles to track down alpha

Which will the client pay, the traditional income tax or the AMT?

They will, most likely, pay the traditional federal income tax bill to Uncle Sam. However, if the dollar amount of their AMT liability is higher than their standard federal income tax bill, the clients will be among the several millions or so households that must now pay under the alternative system.

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Accounting

SEC’s Semiannual Reporting Proposal Faces Investor Pushback: What CFOs Need to Know

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1 week ago

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August 25, 2026

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U.S. Securities and Exchange Commission (SEC)

A proposal from the U.S. Securities and Exchange Commission to potentially shift some public companies away from quarterly financial reporting toward a semiannual model is drawing significant pushback from investors, even as it continues moving through the regulatory process. The debate has direct implications for corporate finance teams, auditors, and the broader transparency of U.S. capital markets.

What the SEC Proposed

According to a summary published by accounting advisory firm Cohen & Co., the SEC issued a proposed rule on May 19, 2026, aimed at simplifying financial reporting requirements for many U.S. public companies. The proposal would potentially reduce the frequency of certain mandatory disclosures from quarterly to semiannual, a structural change that has not been made to core U.S. reporting requirements in decades.

The proposal follows an extended debate within U.S. policy circles, with proponents arguing that reduced reporting frequency could lower compliance costs and free up management time for longer-term strategic planning rather than quarter-to-quarter results management.

Why Investors Are Pushing Back

Comment letters submitted in response to the proposal have been extensive, and according to Cohen & Co.’s review of the public record, investors “appear to be largely opposed” to the shift, viewing frequent interim reporting as a core benefit of U.S. capital markets relative to other jurisdictions.

Accounting and law firms have taken a more measured position, generally urging any changes to remain aligned with the Financial Accounting Standards Board (FASB), whose existing disclosure requirements and guidance are built around a quarterly reporting cadence. A shift to semiannual reporting without corresponding changes to FASB guidance could create friction between SEC filing requirements and GAAP-based disclosure expectations.

Lessons From the U.K. Experience

The debate is not without precedent. The United Kingdom moved away from mandatory quarterly reporting for listed companies in 2014, returning to a semiannual disclosure requirement. According to Cohen & Co.’s analysis, that experience offers a cautionary data point: there was no measurable increase in capital expenditure or R&D investment following the change, while analyst coverage of affected companies declined as reliable interim information became less available — a particular risk for smaller and newly public companies that rely on analyst coverage to maintain investor visibility.

Practical Implications for Finance Teams

Beyond the debate over disclosure philosophy, the proposal carries practical complications. Many companies have debt covenants and credit agreements structured around quarterly financial delivery; a shift to semiannual reporting could require renegotiating those terms. Reduced reporting frequency would also extend the “window of market silence” between disclosures, a factor that governance and investor-relations teams would need to manage carefully to avoid information asymmetry.

Separately, and unrelated to the reporting-frequency debate, the SEC and FASB have continued finalizing more routine updates this year. New Accounting Standards Updates are taking effect for December 31, 2026, fiscal year-ends covering income tax disclosures, credit loss measurement, induced debt conversions, and stock compensation, according to Eide Bailly’s review of 2026 ASU activity. Additional guidance on paid-in-kind dividends and environmental credits is also on the near-term horizon.

What to Watch Next

The semiannual reporting proposal remains in the comment and review phase, and no final rule has been adopted as of this writing. Finance leaders should monitor the SEC’s regulatory agenda for further movement, while treating the current quarterly reporting requirement as the operative standard until any final rule is issued and an effective date is set.

Given the extent of investor opposition documented in the comment file, a full shift to mandatory semiannual reporting appears more likely to result in either a scaled-back compromise or continued study rather than swift adoption — though the SEC’s ultimate direction remains uncertain.

 

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Accounting

AI-Driven Automation and Continuous Accounting Frameworks

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3 weeks ago

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August 15, 2026

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The accounting profession is undergoing a fundamental structural transition as enterprise finance departments shift from periodic month-end closes toward automated continuous accounting models. By integrating specialized machine learning algorithms directly into enterprise resource planning (ERP) platforms, chief accounting officers are transforming financial reporting from a retrospective exercise into a real-time operational asset.

The Shift from Periodic Close to Continuous Financial Reporting
Traditional accounting workflows heavily relied on manual data reconciliation, spreadsheet calculations, and multi-week closing cycles at the end of each fiscal period. In contrast, continuous accounting frameworks utilize automated software agents to process, validate, and post transactional data in real time as business activities occur.

Automated bank reconciliation tools cross-reference incoming bank feeds, invoice records, and purchase orders automatically. By resolving transactional variances instantly throughout the month, corporate accounting teams eliminate the traditional workload spikes associated with quarterly and annual closes.

Machine Learning in Audit Trails and Anomaly Detection
Advanced natural language processing (NLP) and machine learning tools are redefining internal audit and financial control environments. Automated systems analyze 100% of general ledger entries, identifying anomalous transactions, duplicate payments, and unauthorized journal entries in real time.

Rather than relying on random statistical sampling, corporate internal auditors can focus their attention on high-risk flags automatically surfaced by algorithmic monitoring platforms. This continuous risk assessment strengthens internal controls over financial reporting (ICFR) and significantly reduces fraud risk.

Evolving Roles for Accounting Professionals
As routine data entry and manual reconciliation tasks become fully automated, the skill set required for accounting professionals is shifting toward data analysis, system design, and strategic business advisory.
– Systems Governance: Accountants are increasingly responsible for monitoring algorithmic accuracy and managing data integration pipelines.
– Business Partnership: Finance professionals leverage real-time financial dashboards to advise operational leaders on margin management and working capital allocation.
– Regulatory Compliance Management: Accounting teams utilize automated platforms to ensure compliance with dynamic tax codes and international accounting standards.

Core Implementation Recommendations
1. Deploy Automated Reconciliation Tools: Integrate continuous transaction processing modules into existing enterprise ERP architectures.
2. Establish Algorithmic Governance Controls: Implement strict internal testing protocols to ensure automated accounting rules comply with GAAP/IFRS standards.
3. Reskill Accounting Teams: Invest in training finance staff on data analytics, workflow automation, and predictive financial modeling.

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Accounting

Global ESG Reporting Standards and Double Materiality Compliance

Published

4 weeks ago

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August 9, 2026

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Corporate accounting departments face expanding reporting expectations as international sustainability disclosure standards achieve regulatory enforcement across major global jurisdictions. Chief Accounting Officers (CAOs) and corporate controllers are establishing rigorous internal accounting controls to treat Environmental, Social, and Governance (ESG) metrics with the same data precision, auditability, and governance as traditional financial statements.

Regulatory Harmonization Under Global Sustainability Frameworks
The implementation of standardized sustainability reporting frameworks—notably rules established by international sustainability accounting boards—has created unified expectations for public and large private enterprises. Corporations must report standardized metrics covering greenhouse gas emissions (Scope 1, 2, and material Scope 3), energy utilization, workforce demographics, and supply chain governance.

In Europe and other participating international jurisdictions, double materiality principles are mandatory. Under double materiality, organizations must report both how external sustainability risks impact corporate financial performance, and how internal corporate operations affect surrounding environmental and social structures.

Integrating Sustainability Metrics into Core ERP Systems
To provide auditable non-financial data, enterprise organizations are integrating specialized carbon accounting and ESG management platforms directly into core ERP systems. Automated data collectors capture energy utility invoices, logistics fuel consumption metrics, and vendor compliance records in real time.

Establishing automated, traceable data pipelines ensures that non-financial reporting is supported by clear audit trails. This structured approach allows external financial auditors to provide reasonable assurance on sustainability disclosures during annual corporate reporting cycles.

Financial Impacts and Capital Market Disclosure
Accurate ESG reporting directly influences corporate cost of capital and institutional credit ratings. Commercial lenders and institutional asset managers systematically incorporate sustainability metrics into risk pricing models. Companies that demonstrate transparent, verifiable progress in operational energy efficiency and climate risk mitigation benefit from expanded access to green bond markets and lower debt pricing.

Action Steps for Accounting Leadership
1. Implement Double Materiality Frameworks: Conduct comprehensive assessments to identify material financial and operational sustainability metrics.
2. Build Auditable Non-Financial Data Pipelines: Automate ESG data collection within core accounting software to ensure data integrity.
3. Align Sustainability with Annual Financial Filings: Prepare non-financial disclosures concurrently with financial statements to satisfy regulatory audit expectations.

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