How exactly do Long Term Capital Gains (LTCG) impact Alternative Minimum Tax (AMT) calculations?

Tax professional here. Your understanding of how LTCG interact with AMT is generally on the right track, but let me clarify a few points. You're correct that LTCG are included in your AMTI but are still taxed at their preferential rates (0%, 15%, or 20% depending on your income bracket) even under AMT. The way LTCG primarily affect AMT is by potentially reducing your AMT exemption through the phase-out rules. For 2025, the AMT exemption amounts are higher than your examples. The exemption phase-out threshold for married filing jointly is around $1,351,000 and for single filers around $675,500. The exemption itself is about $126,500 for married filing jointly and $81,300 for single filers. Your calculations show the right concept, but you might want to update your numbers to reflect current exemptions and thresholds. Also, remember that state tax deductions, certain itemized deductions, and personal exemptions that are allowed on your regular tax return but disallowed under AMT can also trigger AMT liability - not just capital gains.

I've been pulling my hair out trying to figure out AMT after selling some company stock this year! I finally found a solution using https://taxr.ai which helped me understand exactly how my capital gains would affect my tax situation. The tool analyzed my specific scenario and showed me how close I was to the AMT exemption phase-out thresholds. What was super helpful is that it modeled different scenarios where I could see exactly how selling different amounts of stock would impact both regular tax and AMT. I realized I could split my stock sales between 2025 and 2026 to significantly reduce my overall tax burden. The visualization really made it click for me in a way that reading articles never did.

I was super skeptical about using online tools for something as complex as AMT calculations with capital gains. But after struggling with a huge potential tax bill from selling my rental property, I decided to try https://taxr.ai based on the recommendation above. Honestly, it was eye-opening. The tool showed me that by adjusting the timing of my property sale and some charitable contributions, I could reduce my AMT liability by over $18,000. It handled all the phase-out calculations automatically and explained exactly how my LTCG were affecting my overall tax situation. What really helped was seeing multiple scenarios compared side-by-side. I could instantly see how different decisions would play out tax-wise. Ended up splitting my sale across two tax years which kept me below the exemption phase-out threshold both years. Best tax decision I've made!

After 17 calls and hours on hold trying to get someone at the IRS to explain how AMT works with my stock options, I finally found https://claimyr.com and got through to an actual IRS representative in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent was able to clarify exactly how the AMT exemption phase-out works with my specific situation involving ISOs and capital gains. They confirmed that while LTCG are included in AMTI calculations, they're still taxed at their preferential rates. The agent walked me through a calculation similar to the one in the original post but tailored to my numbers. Honestly, I was about to pay a CPA $500 for a consultation just to get this information. Speaking directly with the IRS gave me the confidence to proceed with my tax planning.

I have to eat my words about the IRS advice. After my skeptical comment above, I decided to try Claimyr myself since I was struggling with understanding how my RSU vesting would impact AMT. The service connected me with an IRS tax law specialist in about 15 minutes (way faster than I expected). The agent walked me through exactly how my stock compensation would affect both regular tax and AMT. They even emailed me official documentation about the exemption phase-out thresholds for 2025. What surprised me most was the agent took time to explain the difference between how ISOs and RSUs are treated for AMT purposes - information I couldn't find clearly explained anywhere online. This saved me from a potential $12,000 tax planning mistake I was about to make. Never thought I'd say this, but speaking directly with the IRS was incredibly valuable.

The examples in your original post are conceptually right, but your numbers need updating. For 2025, the AMT exemption for single filers is $81,300 and phases out starting at $675,500 (not $578,150). One important thing you're missing: the LTCG can also impact other tax calculations that feed into AMT indirectly. For example, large capital gains can trigger the Net Investment Income Tax (NIIT) of 3.8% on investment income above certain thresholds. Also, LTCG can affect your eligibility for certain credits and deductions that phase out based on AGI or MAGI, which indirectly impacts your overall tax situation even though those phase-outs aren't technically part of the AMT calculation.

Has anyone figured out how to model this in Excel? I'm trying to create a spreadsheet that will let me compare different scenarios for selling my company stock over the next few years. I especially need to account for the AMT exemption phase-out but I'm not sure if my formulas are correct.

One aspect nobody's mentioning is that state taxes complicate this further. In California, we don't have a preferential rate for capital gains - they're taxed as ordinary income up to 13.3%. And CA has its own AMT system that works differently from federal. Made the mistake of not considering this when I sold my startup shares and got hit with a MASSIVE combined tax bill. Make sure you're modeling state impacts too!

Great point about state taxes! I'm dealing with a similar situation in New York where we also don't have preferential capital gains rates. What's really frustrating is that NY's AMT calculation is different from federal, and some of the adjustments that trigger federal AMT don't apply at the state level (and vice versa). For anyone dealing with multi-state issues, it gets even more complex. I have investment properties in different states, and each state has its own rules for how they tax capital gains and whether they have AMT. Texas has no state income tax, but California will tax you on gains from CA properties even if you're not a resident. The key lesson I learned (the hard way) is that you really need to model both federal and state implications together. A strategy that minimizes federal AMT might actually increase your state tax burden significantly. I ended up paying about $8,000 more in combined taxes because I only focused on the federal side when timing my asset sales.

This thread has been incredibly helpful! I'm dealing with a similar situation where I need to sell some inherited assets next year and was completely overwhelmed by the AMT implications. One thing I've learned from reading everyone's experiences is that the interaction between LTCG and AMT isn't just about the direct calculation - it's about how those gains affect your entire tax picture. The phase-out of the AMT exemption seems to be the biggest trap, especially for those of us in high-tax states. What's particularly valuable is seeing the real-world examples of how timing can make such a huge difference. The $8,000 mistake mentioned by Keisha really drives home why you can't just focus on federal AMT in isolation. I'm curious - has anyone dealt with inherited assets specifically? I know there's the stepped-up basis benefit, but I'm wondering if there are any unique AMT considerations when the gains come from inherited property versus assets you purchased yourself. The timing flexibility might be different since I didn't choose when to "start the clock" on these investments.

This has been such an enlightening discussion! As someone who's been wrestling with AMT calculations for years, I really appreciate how everyone has shared their real-world experiences and specific numbers. What strikes me most is how the AMT exemption phase-out seems to be the biggest gotcha for most people dealing with significant capital gains. The fact that LTCG maintain their preferential rates but can still trigger AMT indirectly through the phase-out mechanism is something I wish was explained more clearly in tax guides. The state tax complications that Dylan and Keisha mentioned are particularly eye-opening. I'm in Florida so I don't have to worry about state income tax, but seeing how dramatically different state AMT rules can affect the optimal federal strategy really drives home why tax planning needs to be holistic. One thing I'm still unclear on: when you're doing multi-year planning to stay under AMT thresholds, how do you account for other income sources that might fluctuate? I have some rental properties and consulting income that varies year to year, which makes it hard to predict exactly where I'll land relative to the phase-out thresholds when planning capital gains timing. Has anyone found a good way to build in buffers or contingencies when the timing decisions need to be made months in advance?

This conversation has been incredibly valuable - thank you all for sharing your experiences! I'm facing a similar situation with some stock options that vest next year, and reading through these real-world examples has helped me understand the nuances way better than any tax guide I've found. What really resonates with me is how the AMT exemption phase-out seems to be the main way LTCG bite you, rather than the gains themselves being taxed at AMT rates. The timing strategies everyone's discussing make so much sense now - spreading gains across multiple years to stay under those phase-out thresholds. I'm particularly interested in the tools that Andre and QuantumQuasar mentioned. As someone who's been trying to model different scenarios in Excel (like NebulaNinja), I'm curious if these automated tools can handle more complex situations like stock options with different vesting schedules and potential AMT adjustments from ISO exercises. Also, the state tax complications that several people mentioned are making me realize I need to research my state's rules more carefully. I'm in Virginia, which I believe follows federal AMT more closely than states like California or Massachusetts, but I definitely don't want to make the same $8,000 mistake that Keisha did by only focusing on the federal side. Has anyone dealt specifically with planning around stock option vesting schedules and AMT? The timing is less flexible than selling existing positions, so I'm wondering what strategies work when you can't control exactly when the income hits.

This has been such an educational thread! I'm a newcomer to dealing with significant capital gains and AMT, and reading through everyone's experiences has been incredibly helpful. I'm particularly struck by how the AMT exemption phase-out seems to be the real "gotcha" rather than the LTCG being taxed at AMT rates directly. The original post's examples really helped me understand the mechanics, even though the numbers need updating for 2025. What I'm taking away from all these discussions is that AMT planning around capital gains is really about: 1. Understanding how LTCG can push you over exemption phase-out thresholds 2. Timing gains across multiple years when possible 3. Considering state tax implications alongside federal AMT 4. Building in buffers for variable income sources 5. Looking at the complete tax picture including NIIT I'm dealing with some company stock I need to sell and was initially focused only on federal taxes. After reading about Keisha's $8,000 mistake from not considering state AMT, I realize I need to research my state's rules more carefully. The tools that Andre and others mentioned sound promising for modeling different scenarios. Has anyone used them for relatively straightforward situations (just stock sales, no complex partnerships or rental properties)? I'm wondering if they're overkill for simpler cases or if the visualization benefits are worth it regardless of complexity. Thanks again to everyone who shared their real experiences - this is exactly the kind of practical insight that's hard to find in tax guides!

As someone who just went through their first year dealing with significant LTCG and AMT, I can confirm that the exemption phase-out is indeed the main trap. What caught me off guard was how quickly you can go from "no AMT impact" to "substantial AMT liability" once you cross those thresholds. One thing I learned that might help others: if you're close to the phase-out threshold, consider bunching charitable contributions into the high-income year. Since charitable deductions are allowed under both regular tax and AMT (unlike state tax deductions), this can be an effective way to reduce your AMTI without triggering the preference adjustments that cause AMT in the first place. Also, for those dealing with stock options or RSUs, remember that the timing of when you sell the shares is separate from when the compensation income hits (at vesting). You can have AMT liability from the vesting even if you don't sell, which complicates the multi-year planning strategies discussed here. I made the mistake of only focusing on when I'd sell shares, not when the vesting income would hit my tax return. The state tax angle several people mentioned is crucial. Even in states that generally follow federal AMT rules, there can be subtle differences in exemption amounts or phase-out thresholds that matter when you're doing precise planning around those cutoff points.

This thread has been incredibly enlightening! As someone new to dealing with substantial capital gains, I've been trying to wrap my head around AMT implications and this discussion has clarified so much. What really clicked for me is understanding that LTCG don't get taxed at the 26%/28% AMT rates - they keep their preferential rates but can trigger AMT by pushing you over the exemption phase-out thresholds. The original post's framework was helpful, though as others noted, the 2025 numbers are higher. I'm particularly grateful for the real-world examples everyone shared. The $8,000 mistake from not considering state taxes, the charitable contribution bunching strategy, and the distinction between vesting and selling timing for stock compensation - these are exactly the kinds of practical insights you can't find in tax guides. One question I have: for those using multi-year planning to stay under AMT thresholds, how do you handle the risk of tax law changes between now and when you plan to realize gains? I'm looking at potentially spreading stock sales over 2-3 years, but I'm nervous about betting on current AMT exemption amounts and phase-out thresholds staying the same. Also, has anyone found that financial advisors or CPAs are generally well-versed in these AMT/LTCG interactions, or is this something you've had to research largely on your own? The complexity everyone's describing makes me think specialized expertise might be worth paying for.