Does the alternative minimum tax (AMT) apply when selling a rental?

The minimum tax keeps the capital gains rates but not the exemption

Section 55(b)(3) caps the tax on net capital gain in the AMT computation at the same 0%, 15%, 20% and 25% rates the regular tax uses, and Part III of Form 6251 applies them. The gain is not an AMT preference item.

The exemption is the weak point. Rev. Proc. 2025-32 sets the 2026 exemption at $140,200 joint and $90,100 single, with phase-outs starting at $1,000,000 and $500,000. The July 2025 tax act doubled the phase-out rate to 50% in section 55(d)(4) for years after 2025, so the exemption is gone at $1,280,400 joint and $680,200 single.

The sale counts in full toward those thresholds. A household that never meets the AMT can lose its entire exemption in the year it sells.

Without the exemption, the ordinary slice and the depreciation slice cost more

Once the capital gain is carved out, the rest of AMT income is taxed at 26%, and 28% above $244,500 of taxable excess for 2026. The standard deduction is not allowed, and the Instructions for Form 6251 add back state and local taxes for itemizers.

The depreciation slice is also treated differently. On the regular return, the Schedule D Tax Worksheet charges your ordinary rate on unrecaptured section 1250 gain while it fits under the 24% bracket. Form 6251 taxes that slice at a flat 25%, so a seller with moderate wages loses the lower rates there too.

Add those effects together and the tentative minimum tax can pass the regular tax. The excess is the AMT, reported on Schedule 2.

Worked example: $250,000 of wages and a $1,500,000 gain

Hypothetical, 2026, married filing jointly, standard deduction, no other preference items, figured on the structure of the 2025 Form 6251 with 2026 amounts; run your own numbers with your CPA. Wages are $250,000 and the rental sale produces a $1,500,000 long-term gain, of which $200,000 is depreciation taken.

The regular tax is about $335,100. AMT income is $1,750,000, well past $1,280,400, so the exemption is zero. The tentative minimum tax is about $364,600: $250,000 at 26% and 28%, the full $200,000 depreciation slice at 25%, and the remaining gain at the same 15% and 20% rates as the regular return.

The AMT is the difference, about $29,500. Almost all of it comes from the wage slice moving from the 10% to 24% regular brackets, with no standard deduction, to 26% and 28%, with the rest from the depreciation slice.

• Regular tax: about $335,100.
• Tentative minimum tax: about $364,600.
• AMT due: about $29,500, on top of the regular tax.
• With the same wages and a $600,000 gain, AMT income stays under $1,000,000 and no AMT arises.

Older buildings can carry a different AMT basis, which usually helps

The Form 6251 instructions say not to refigure depreciation for residential rental property placed in service after 1998, or for nonresidential real property placed in service after 1998 on the straight-line method. For most current rentals the AMT gain equals the regular gain.

For section 1250 property placed in service before 1999, AMT depreciation is straight line over 40 years. That is slower than the regular method was, so the AMT basis is higher and the AMT gain smaller. Line 2k of Form 6251 records the difference, generally as a negative adjustment.

If you bought before 1999, ask your preparer to rebuild the AMT basis rather than copying the regular figure.

An exchange avoids the issue, and splitting a large sale can reduce it

A completed exchange recognizes no gain, so AMT income stays near your other income and the exemption survives. That is one more effect of deferral, beyond the rates covered in the NIIT and a rental sale and how gain stacks on your wages.

If you plan to take cash, the size of the boot matters. Keeping recognized gain low enough that AMT income stays under $1,000,000 joint protects the exemption, a planning point in intentional boot strategy.

A Delaware Statutory Trust interest named on your identification list can take the exact remaining proceeds so no unplanned boot is left.