What are "preference items", and is it good to have them, or bad? Also, how do you get AMT credits that carry over from year to year? I believe that there's an article in the FAQ that goes into more detail. But in a nutshell preference items are a bad thing where AMT is concerned. They can increase your taxes.There's two types of items that cause differences between taxable income for regular and AMT purposes.First are preferences. Preferences are things that are generally not deductible for AMT purposes. These include taxes, medical expenses over 10% of your AGI (rather than the 7.5% for regular tax purposes), miscellaneous itemized deductions, and some rather esoteric things like depletion. These items will always increase your AMT taxable income as compared to your regular taxable income.The second difference is from timing adjustments. These are items that are recognized at different times for the two tax schemes. Over a sufficient number of years, the total income or deductions for these items will be the same for AMT and regular tax, but they will be recognized in different years. A couple of examples are depreciation (AMT uses different depreciation schedules than regular tax) and incentive stock options (AMT doesn't allow the deferral that the regular tax does). These items can cause your AMT taxable income to be higher OR LOWER than your regular taxable income.I'm sure there are plenty of other examples - you could check the instructions for form 6251 for a more complete list.It is those second type of items, the timing ones, that can cause an AMT credit. To the extent that you pay AMT due to a timing difference, you are allowed a credit on your regular tax in the year that the timing difference reverses. This keeps you from paying a tax twice on the same income.--Peter
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