How is taxable income from home sale calculated for AMT. Is the 250k/500k exclusion allowed for AMT (i.e. is taxable AMT income calculated after excluding the 250/500k)?

[vijay_v]

As a hypothetical example, let's say I am single and sold a home for $400k over purchase price + closing costs etc. For regular tax my understanding is that with the 250k exclusion, taxable income will be 400k gain - 250k exclusion = $150k taxable income. Will that be the taxable income for AMT as well (or will it be the "full" $400k?)

[Anonymous_]

The calculation should involve only the taxable amount ($150,000).

I'll also page  @Mike9241 

[Mike9241 · Accepted solution]

only the taxable portion of the gain (ie after the exclusion) would be included in the AMT calculation, this assumes your regular tax and AMT gain are the same. This is usually the case. why wouldn't they you may ask? here's one possibility. you acquired rental property at a time when the depreciable life was different for regular tax and amt tax purposes. then you convert to a personal residence. the basis difference remains so the tax basises /gains are different.   

[vijay_v]

Hi Mike (and team),

Thanks for quick and detailed response. The additional context around recapturing depreciation (if applicable) being the reason they touch home sale in AMT makes sense.

Is there any IRS publication that explicitly talks about this / states that the exclusion doesn't have to be "taken out" when computing AMT. Or are you inferring this by following the steps for calculating regular 1040 tax (where you take the exclusion), then following the steps for AMT and not seeing anything that asks filer to "take out" the home sale exemption of 250k/500k? 

[Anonymous_]

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@vijay_v wrote:

Is there any IRS publication that explicitly talks about this / states that the exclusion doesn't have to be "taken out" when computing AMT.

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Forget any IRS publication. Section 121 expressly states that the home sale exclusion ($250,000/$500,00) is excluded from gross income.

(a) Exclusion

Gross income shall not include gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.

[Mike9241]

@vijay_v the home sale exclusion is the same for AMT. the only difference would be if you took depreciation on the home. if the depreciation was in years where AMT depreciation was different than regular depreciation then there would be a negative adjustment on the 6251 form because AMT depreciation would have been less than regular tax depreciation. this would all be automatic provide you complete the home sale worksheet correctly.