A tax preference item is an income or deduction excluded or partially excluded from regular tax calculations but must be added back for alternative minimum tax (AMT) purposes.
A tax preference item refers to a specific item of income, tax deduction, or tax credit that is considered to provide an extra benefit under federal tax law. These items are identified as potentially leading to excessively low tax liability for some taxpayers, which is why the Alternative Minimum Tax (AMT) is imposed to ensure a minimum tax is paid.
