Tax Preference Items Law and Legal Definition

Tax preference items mean any taxable transaction or asset of a taxpayer generates an alternative minimum tax (AMT). For example: items such as accelerated depreciation, percentage depletion or certain tax-exempt income that are measured to have favorable tax treatment and could cause the alternative minimum tax. Basically, the tax preference item of an organization ensures a wide range of tax deductions, exemptions and credits. When the tax preference items accumulate with the adjusted income resulted to a higher amount that amount is subject to taxation. All taxpayers are prospective aspirants for the submission of a tax preference item. Persons with high income levels may be subject to the inclusion of items on the tax return.