Tax Preference Item (redirected from Preference Item)

Tax preference item

Items that must be included when calculating the alternative minimum tax.

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Tax Preference Item

Income or other event that is excluded when calculating one's ordinary tax liability but is included when calculating one's liability for the alternative minimum tax. That is, a tax preference item is an item that would be tax deductible under normal circumstances but is not for purposes of the alternative minimum tax. Examples include depreciation and some interest on municipal bonds.

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tax preference item

An item that can be legally omitted in order to reduce taxable income when calculating an individual's tax liability by ordinary means. However, the item must be included when calculating the individual's alternative minimum tax. For example, interest paid by certain municipal bonds that is ordinarily omitted in calculating taxable income must be included when calculating the alternative minimum tax.