A 1040 doesn't end at line 24. The exam tests the other taxes and special computations that pile on top of regular tax: alternative minimum tax (AMT), SE tax, net investment income tax (NIIT), Additional Medicare, household employees, underpayment penalties, and a half-dozen recapture items. Master the form-to-tax mapping and the math falls out.
AMT runs a parallel tax on a broader base and forces you to pay the larger of regular tax or tentative AMT. Compute on Form 6251.
Start with regular taxable income, add back AMT adjustments (state and local taxes deducted on Schedule A, the standard deduction if claimed), then add tax preferences. Two preference items dominate exam questions:
- Incentive stock option (ISO) bargain element at exercise (fair market value (FMV) minus exercise price) is an AMT preference in the year exercised, even though no regular tax applies until...
- Private activity bond interest issued for non-governmental purposes is taxable for AMT, exempt for regular tax.
The 2025 exemption is $88,100 single, $137,000 MFJ, $68,500 MFS, phasing out at 25¢ per $1 of AMTI above $626,350 single / $1,252,700 MFJ.
Common mistakes
- Applying the SE Social Security 12.4% on top of W-2 wages already at the wage base. The $176,100 base is shared. W-2 Social Security wages of $176,100 leave zero base for the SE Social Security portion. Only the 2.9% Medicare piece survives.
- Treating the AMT credit as available for SALT-based AMT. AMT triggered by exclusion preferences (SALT add-back, standard deduction add-back, private activity bond interest) generates no Form 8801 credit. Only deferral preferences (ISO bargain element, accelerated depreciation) feed the credit.
- Assuming a single-employer Social Security overpayment is self-credited. The employee cannot claim excess SS on Schedule 3. Only multiple-employer overwithholding flows through Schedule 3. Single-employer fixes go through the employer and Form W-2c.
Bottom line
- AMT (Form 6251): 2025 exemption $88,100 single / $137,000 MFJ / $68,500 MFS; phaseout 25¢ per $1 above $626,350 / $1,252,700; rates 26% to AMTI $239,100 then 28%
- AMT credit (Form 8801): recovers only deferral preferences (ISO bargain element, accelerated depreciation); exclusion-preference AMT (SALT, standard deduction, PAB interest) is gone forever
- SE tax (Schedule SE): 15.3% on 92.35% of net SE earnings (12.4% SS shares the $176,100 base, 2.9% Medicare uncapped); ½ deductible above the line; floor $400
- Excess Social Security: refundable via Schedule 3 only when withheld by two or more employers; a single-employer overpayment is fixed through the employer and Form W-2c
Exam shortcut
The "stack" trick for Additional Medicare and NIIT. Both share the same threshold trio. If a question gives wages, SE income, and investment income for a single taxpayer with AGI > $200,000, expect three separate calculations on three different forms (8959 for wages, 8959 for SE, 8960 for NII), all keyed to the same $200,000 / $250,000 / $125,000 line. The SE-tax shortcut.
The full lesson (about 3,028 words, 20 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
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