The Gift With a Trap Door
Congress just gave every couple over 65 a $12,000 senior deduction. Per couple. Both spouses qualify, you get the full amount. Runs through 2028. Nice headline.
Now open the 2025 instructions for Form 6251. The deduction gets added straight back into your Alternative Minimum Tax calculation.
They wrote the gift and the claw-back in the same bill.
I mean.
The Label Looks the Same
Quick primer. The IRS runs your return twice. Once the normal way. Once a second way that strips out a bunch of deductions and compares the two bills. The higher bill wins. That second run is the AMT.
You get a cushion called the exemption. Income below the cushion doesn't get hit. For 2026, a married couple's exemption is $140,200. Sounds generous. Sounds like nothing changed.
But the cushion shrinks as your income rises. And the speed at which it shrinks just doubled.
In 2025, the shrinking starts at $1,252,700. In 2026, it starts at $1,000,000. That threshold dropped by a quarter million dollars. The old rule shaved 25 cents of exemption for every dollar over the line. The new rule shaves 50 cents.
Same label on the box. Different machine inside.
Same Couple. Same Income. Different Year.
Married couple. $1.1 million in income. Same jobs. Same dividends. Same rental checks hitting the account every month.
In 2025, their income sits below the $1,252,700 threshold. The shrinking hasn't kicked in. They keep the full exemption. No AMT. They don't even file the form.
Roll the calendar to January 2026. Nothing about their life changed. Their $1.1 million now sits $100,000 above the new $1,000,000 threshold. The 50% rate eats $50,000 of their exemption. The IRS taxes that $50,000 at 28%.
$14,000 in extra tax. Same people. Same checks. Different year. The cushion just got thinner under their feet.
The 42% Nobody Printed
This is the number. It shows up on no bracket table. No news segment. No tax prep commercial.
Walk through it. You earn one dollar inside the zone. Because of the 50% rate, you lose fifty cents of exemption. So the IRS now taxes you on a dollar AND on the fifty cents of cushion you just lost. That is a dollar fifty of taxable income. From one dollar earned.
The AMT rate is 28 cents on the dollar. Apply 28 cents to a dollar fifty. You get 42 cents.
Your effective marginal rate inside the zone: 42%. The zone runs from $1,000,000 to about $1,280,400 for joint filers. Every extra dollar of income in that band costs you 42 cents. Congress never printed a 42% bracket. They just built one.
(Capital gains do a bit better inside AMT. Closer to 34%. Still not a picnic.)
The roadshow starts Monday. This stock isn't ready.
The SpaceX roadshow kicks off June 8.
That's Monday.
Goldman Sachs — the lead underwriter — will walk into a room full of the biggest fund managers on Earth and present the S-1.
All 277 pages.
Including the section that names the one small company Musk's Colossus cannot operate without.
Right now, most fund managers have never heard of it.
By Friday, every one of them will.
And when $75 billion in new capital starts chasing the SpaceX supply chain, this stock reprices — fast.
You have until Monday.
Dylan Jovine has the name and ticker.
The Add-Back
Now circle back to the senior deduction. Up to $6,000 per person. $12,000 per couple. From the Form 6251 instructions:
The deduction is treated as a personal exemption that is added back to alternative minimum taxable income as an adjustment under section 56(b)(5)(D).
Right.
Congress gave you $6,000. Form 6251 adds it back. If you sit in the phaseout zone, that extra income chews through your exemption faster. The gift feeds the trap.
One more for the muni bond crowd. Interest from private activity bonds is a preference item under the AMT. Gets added back on Form 6251 too. If you hold those bonds in a taxable account, that income shoves you deeper into the zone. Worth checking what you own.
The Fine Print
The $6,000 looked generous on the label. Big number. Nice headline. It lives on line 1 of Form 6251.
They wrote the deduction and the add-back in the same section of the same law.
Sure.
