Tax Preference Item

外汇网2021-06-19 13:59:05 200

A type of income, normally tax-free, that may trigger the alternative minimum tax (AMT) for taxpayers. Tax pference items include private-activity municipal-bond interest, the qualifying exclusion for small business stock and excess intangible drilling costs for oil and gas, if this amount exceeds 40% of AMT income. Tax pference items are added to the amount of AMT income in the tax formula.

Like the AMT itself, tax pference items are designed to pvent high-income taxpayers from being able to avoid too much income tax via participation in certain activities. For example, investors who own private-activity bonds issued after August or September of 1986 must declare all income received from these bonds, minus investment expenses. This rule thereby pvents taxpayers from shielding all of their investment income in this type of bond issue.

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