Tax Preference Item

Tax Preference Item means:
an item of income, tax deduction, or tax credit deemed to be an extra benefit according to the federal tax law. Such items are thought to result in preferential treatment that may lead to excessively low tax liability for certain taxpayers. Therefore, an alternative minimum tax is imposed on the aggregate of a taxpayer's tax preference items and adjustments in an attempt to ensure a minimum tax liability. Tax preference items include:

• depreciation on real estate to the extent that it exceeds 40-year straight-line depreciation.

• accelerated depreciation on leased personal property to the extent that it exceeds straight-line depreciation.

• the bargain element of an incentive stock option.

• certain rapid write-offs.

• losses from passive activity investment.

• certain itemized deductions (state and local income taxes, real estate taxes, medical expenses not greater than 10% of Adjusted Gross Income).

• miscellaneous itemized deductions in excess of 2% of Adjusted Gross Income

• all interest expense, except home mortgage interest and investment interest, to the extent of net investment income.

• interest on certain tax-exempt bonds issued after August 7, 1986.

• the excess of value deducted over the cost of property given to charitable organizations before 1993 (before June 30, 1992 for tangible personal property) Former IRC (check if this IRC provision is current here) §57.

State Income Tax

See Depreciation in the United States Encyclopedia of Law and Depreciation in the World Encyclopedia of Law.