Which itemized deduction is not allowed for alternative minimum tax (AMT) purposes?

The deduction for real estate taxes is not allowed for alternative minimum tax (AMT) purposes. Under the AMT rules, various itemized deductions that are allowed for regular tax purposes are disallowed in the AMT calculation. Real estate taxes fall into this category, as they can create tax benefits that disproportionately favor certain taxpayers, leading to this exclusion under AMT.

In AMT computation, while taxpayers can continue to claim deductions such as charitable contributions, qualified housing interest, and medical expenses exceeding 7.5% of adjusted gross income (AGI), the exclusion of real estate taxes ensures that the AMT targets a broader tax base by limiting certain popular deductions. This approach is meant to prevent high-income individuals from overly reducing their tax liabilities through common deductions.

Thus, for taxpayers subject to AMT, the inability to deduct real estate taxes can significantly affect their tax calculations, leading to a higher minimum tax obligation compared to what would be owed under the regular tax system.