PavelMakarchuk · Oct 27, 2026 · Oct 16, 2026 · Oct 23, 2026 · Oct 26, 2026
diff --git a/changelog.d/fix-10204-mn-amt-phase-out-rate.fixed.md b/changelog.d/fix-10204-mn-amt-phase-out-rate.fixed.md
@@ -0,0 +1 @@
+Phase out the Minnesota AMT exemption at 25% under Minn. Stat. 290.091, subd. 3(b), instead of the federal rate, which rises to 50% from 2026, and correct the 2025 Minnesota AMT exemption amounts to $95,300, $71,470 and $47,660.
diff --git a/policyengine_us/parameters/gov/states/mn/tax/income/amt/fractional_income_threshold.yaml b/policyengine_us/parameters/gov/states/mn/tax/income/amt/fractional_income_threshold.yaml
@@ -26,6 +26,8 @@ metadata:
     href: https://www.revenue.state.mn.us/sites/default/files/2025-07/m1mt-24.pdf#page=1
   - title: 2025 Minnesota Schedule M1MT form, Line 21
     href: https://www.revenue.state.mn.us/sites/default/files/2026-07/m1mt-25.pdf#page=1
+  - title: Minnesota Department of Revenue, Tax Year 2025 Inflation-Adjusted Amounts, 290.091 Subd. 3 AMT Exemption
+    href: https://www.revenue.state.mn.us/sites/default/files/2024-12/inflation-adjusted-amounts-2025.pdf#page=3
   - title: Minnesota Department of Revenue, Tax Year 2026 Inflation-Adjusted Amounts, 290.091 Subd. 3 AMT Exemption
     href: https://www.revenue.state.mn.us/sites/default/files/2025-12/inflation-adjusted-amounts-2026.pdf#page=3
 
@@ -34,33 +36,33 @@ JOINT:
   2022-01-01: 82_150
   2023-01-01: 87_960
   2024-01-01: 92_710
-  2025-01-01: 95_390
+  2025-01-01: 95_300
   2026-01-01: 97_470
 HEAD_OF_HOUSEHOLD:
   2021-01-01: 59_750
   2022-01-01: 61_610
   2023-01-01: 65_970
   2024-01-01: 69_530
-  2025-01-01: 71_540
+  2025-01-01: 71_470
   2026-01-01: 73_100
 SURVIVING_SPOUSE:
   2021-01-01: 79_660
   2022-01-01: 82_150
   2023-01-01: 87_960
   2024-01-01: 92_710
-  2025-01-01: 95_390
+  2025-01-01: 95_300
   2026-01-01: 97_470
 SINGLE:
   2021-01-01: 59_750
   2022-01-01: 61_610
   2023-01-01: 65_970
   2024-01-01: 69_530
-  2025-01-01: 71_540
+  2025-01-01: 71_470
   2026-01-01: 73_100
 SEPARATE:
   2021-01-01: 39_840
   2022-01-01: 41_080
   2023-01-01: 43_990
   2024-01-01: 46_360
-  2025-01-01: 47_700
+  2025-01-01: 47_660
   2026-01-01: 48_740
diff --git a/policyengine_us/parameters/gov/states/mn/tax/income/amt/phase_out_rate.yaml b/policyengine_us/parameters/gov/states/mn/tax/income/amt/phase_out_rate.yaml
@@ -0,0 +1,15 @@
+description: Minnesota reduces the alternative minimum tax exemption by this share of alternative minimum taxable income above the phase-out threshold.
+values:
+  2021-01-01: 0.25
+
+metadata:
+  period: year
+  unit: /1
+  label: Minnesota AMT exemption phase-out rate
+  reference:
+    - title: Minnesota Statutes Section 290.091, Subd. 3(b) (phase out under IRC 55(d)(2); IRC 55(d)(4) does not apply)
+      href: https://www.revisor.mn.gov/statutes/cite/290.091#stat.290.091.3
+    - title: 26 U.S. Code § 55(d)(2) - 25 percent of alternative minimum taxable income above the threshold
+      href: https://www.law.cornell.edu/uscode/text/26/55#d_2
+    - title: 2025 Minnesota Schedule M1MT form, Line 24
+      href: https://www.revenue.state.mn.us/sites/default/files/2026-07/m1mt-25.pdf#page=1
diff --git a/policyengine_us/tests/policy/baseline/gov/states/mn/tax/income/mn_amt.yaml b/policyengine_us/tests/policy/baseline/gov/states/mn/tax/income/mn_amt.yaml
@@ -38,14 +38,8 @@
   output:
     mn_amt: 675
 
-# 2025 test case
-# Single filer with AMT taxable income at threshold (112_500)
-# fractional_income_threshold = 10% of income_threshold = 0.1 * 112_500 = 11_250
-# AMT income above fractional threshold = 112_500 - 11_250 = 101_250
-# AMT = 6.75% * 101_250 - 0 basic tax = 6,834.375
-# But fractional income (10% threshold) = max(0.1 * 112_500 - AMT_taxable_income, 0) = 0
-# So AMT = max(0.0675 * 112_500, 675) - 0 = 7,593.75
-# Actual computed value is 2764.8
+# 2025 Schedule M1MT, single filer with AMT taxable income at the line 22
+# phase-out threshold of $112,500.
 - name: MN AMT 2025 single at threshold
   absolute_error_margin: 0.01
   period: 2025
@@ -55,4 +49,64 @@
     mn_basic_tax: 0
     state_code: MN
   output:
-    mn_amt: 2764.8
+    # Line 21 exemption 71,470; line 23 excess over 112,500 = 0, so line 25
+    # exemption stays 71,470. Line 26 = 112,500 - 71,470 = 41,030.
+    # Line 27 AMT = 6.75% x 41,030 = 2,769.525.
+    mn_amt: 2_769.525
+
+# Minn. Stat. 290.091, subd. 3(b): the exemption phases out at 25% under
+# IRC 55(d)(2); IRC 55(d)(4), which sets the federal 50% rate from 2026,
+# does not apply. 2026 joint exemption $97,470, threshold $150,000.
+- name: MN AMT 2026 joint exemption phases out at 25%, not the federal 50%
+  absolute_error_margin: 0.01
+  period: 2026
+  input:
+    filing_status: JOINT
+    mn_amt_taxable_income: 300_000
+    mn_basic_tax: 0
+    state_code: MN
+  output:
+    # Reduction = 25% x (300,000 - 150,000) = 37,500.
+    # Exemption = 97,470 - 37,500 = 59,970.
+    # AMT = 6.75% x (300,000 - 59,970) = 6.75% x 240,030 = 16,202.03.
+    # (At 50% the exemption would be 22,470 and the AMT 18,733.28.)
+    mn_amt: 16_202.03
+
+- name: MN AMT 2026 joint, no AMT when regular tax exceeds the 25% phase-out AMT
+  absolute_error_margin: 0.01
+  period: 2026
+  input:
+    filing_status: JOINT
+    mn_amt_taxable_income: 300_000
+    mn_basic_tax: 17_000
+    state_code: MN
+  output:
+    # max(0, 16,202.03 - 17,000) = 0. (At 50%: 18,733.28 - 17,000 = 1,733.28.)
+    mn_amt: 0
+
+- name: MN AMT 2026 single, exemption fully phased out
+  absolute_error_margin: 0.01
+  period: 2026
+  input:
+    filing_status: SINGLE
+    mn_amt_taxable_income: 500_000
+    mn_basic_tax: 0
+    state_code: MN
+  output:
+    # 25% x (500,000 - 112,500) = 96,875 > 73,100 exemption, so exemption = 0.
+    # AMT = 6.75% x 500,000 = 33,750.
+    mn_amt: 33_750
+
+- name: MN AMT 2025 joint control at the 25% phase-out rate
+  absolute_error_margin: 0.01
+  period: 2025
+  input:
+    filing_status: JOINT
+    mn_amt_taxable_income: 300_000
+    mn_basic_tax: 0
+    state_code: MN
+  output:
+    # 2025 Schedule M1MT: line 21 joint exemption 95,300; line 24 reduction
+    # 25% x (300,000 - 150,000) = 37,500; line 25 exemption 57,800.
+    # Line 27 AMT = 6.75% x (300,000 - 57,800) = 6.75% x 242,200 = 16,348.50.
+    mn_amt: 16_348.50
diff --git a/policyengine_us/variables/gov/states/mn/tax/income/amt/mn_amt.py b/policyengine_us/variables/gov/states/mn/tax/income/amt/mn_amt.py
@@ -8,8 +8,10 @@ class mn_amt(Variable):
     unit = USD
     definition_period = YEAR
     reference = (
+        "https://www.revisor.mn.gov/statutes/cite/290.091#stat.290.091.3",
         "https://www.revenue.state.mn.us/sites/default/files/2023-02/m1mt_21.pdf",
         "https://www.revenue.state.mn.us/sites/default/files/2023-01/m1mt_22.pdf",
+        "https://www.revenue.state.mn.us/sites/default/files/2026-07/m1mt-25.pdf",
     )
     defined_for = StateCode.MN
 
@@ -18,9 +20,11 @@ def formula(tax_unit, period, parameters):
         # calculate gross AMT amount
         filing_status = tax_unit("filing_status", period)
         p = parameters(period).gov.states.mn.tax.income
-        p_gov = parameters(period).gov.irs.income.amt.exemption.phase_out
         excess_taxinc = max_(0, taxinc - p.amt.income_threshold[filing_status])
-        fractional_taxinc = excess_taxinc * p_gov.rate
+        # Minn. Stat. 290.091, subd. 3(b): the exemption phases out under
+        # IRC 55(d)(2) at 25%, and IRC 55(d)(4), which sets the federal 50%
+        # rate from 2026, does not apply.
+        fractional_taxinc = excess_taxinc * p.amt.phase_out_rate
         fractional_threshold = p.amt.fractional_income_threshold[filing_status]
         taxinc_amount = max_(0, fractional_threshold - fractional_taxinc)
         net_taxinc = max_(0, taxinc - taxinc_amount)
Original file line number	Diff line number	Diff line change
		@@ -0,0 +1 @@
		Phase out the Minnesota AMT exemption at 25% under Minn. Stat. 290.091, subd. 3(b), instead of the federal rate, which rises to 50% from 2026, and correct the 2025 Minnesota AMT exemption amounts to $95,300, $71,470 and $47,660.