Form 6251
Also: Form 6251, AMT form, 6251
The IRS form used to compute Alternative Minimum Tax. Required whenever a filer has AMT preference items such as ISO exercises, high state tax deductions, or depreciation differences.
Form 6251 is the IRS form that computes Alternative Minimum Tax. It starts from regular taxable income, adds preference items, subtracts AMT-specific deductions, applies the AMT exemption with its phase-out, and computes tentative minimum tax at the 26% and 28% rates. The result is compared to regular tax to determine whether AMT is owed. ISO bargain elements, state and local tax deductions beyond AMT allowance, and certain depreciation adjustments are the most common preference items for tech employees.
Example: a California filer with $400,000 of wages, $250,000 of ISO bargain element, and $40,000 of SALT deductions reports the $250,000 on line 2i and adjusts SALT back on line 2a. The resulting AMTI produces a tentative minimum tax of roughly $155,000, creating AMT of approximately $30,000 above regular tax.
Common mistake: ignoring Form 6251 when no ISOs were exercised. Large capital gains combined with SALT deductions and Roth conversions can still trigger AMT at senior-level income even without options.
Form 6251 matters at every ISO exercise, at sale of ISO shares (for the negative basis adjustment), and at tax-planning projections.