Alternative Minimum Tax (AMT)

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Alternative Minimum Tax (AMT)

Key takeaways

  • The AMT is a parallel tax system that ensures high earners pay a minimum level of federal income tax.
  • It adds back certain deductions and adjustments to compute alternative minimum taxable income (AMTI), then applies a separate exemption and tax rates.
  • Exemption amounts are phased out at higher AMTI levels.
  • The taxpayer pays the greater of regular tax or AMT.
  • Use IRS Form 6251, tax software, or a tax professional to determine AMT liability.

What the AMT is

The Alternative Minimum Tax (AMT) is designed to prevent taxpayers with substantial income from eliminating their federal tax liability through deductions and tax preferences. Instead of relying only on regular tax calculations, the AMT recalculates taxable income by adding back certain deductions and adjustments. The result—alternative minimum taxable income (AMTI)—is taxed under AMT rules; the taxpayer then pays whichever is higher: the regular tax or the AMT.

How AMT is calculated (overview)

  1. Start with regular taxable income.
  2. Add back specified tax preferences and adjustments to reach AMTI.
  3. Subtract the AMT exemption (if not fully phased out).
  4. Apply AMT tax rates (26% or 28%) to the remaining AMTI.
  5. Compare the AMT result with your regular tax—the higher amount is your tax liability.

Exemptions, phaseouts, and rates (recent figures)

  • AMT exemptions reduce AMTI before rates are applied. Exemption amounts (recently indexed for inflation) include:
  • Single filers: $85,700 (2024) → $88,100 (2025)
  • Married filing jointly: $133,300 (2024) → $137,000 (2025)
  • Exemptions phase out as AMTI rises. Phaseout starts at:
  • Single filers: $609,350 (2024) → $626,350 (2025)
  • Married filing jointly: $1,218,700 (2024) → $1,252,700 (2025)
    Exemptions are reduced by $0.25 for each dollar of AMTI above the phaseout threshold.
  • AMT tax rates are 26% and 28%. The 28% rate applies once AMTI exceeds a threshold (e.g., about $239,100 as of 2025; the threshold is half that amount for married filing separately).

Brief history and context

The AMT was enacted in 1969 after investigators found that some high-income taxpayers were paying little or no federal income tax by using deductions and credits. Rather than eliminating those deductions outright, Congress created the AMT to ensure a minimum tax. The AMT has been adjusted over time—exemptions were indexed for inflation (beginning in 2012), and the Tax Cuts and Jobs Act (TCJA) of 2017 changed many tax provisions that affected how and how often the AMT applies.

Do you owe AMT?

If you are not a high earner, you likely won’t owe AMT. To determine liability:
* Complete IRS Form 6251 (Alternative Minimum Tax—Individuals); it calculates AMT and compares it to regular tax.
Many tax software programs complete Form 6251 automatically.
 Because Form 6251 can be detailed, consider a tax professional if your situation is complex.
* If the AMT is owed, Form 6251 must be filed with your tax return.

Bottom line

The AMT exists to ensure taxpayers with substantial income pay a minimum level of federal tax despite using certain deductions or preferences. While it primarily affects higher earners, taxpayers near the AMT phase-in range should verify their liability each year. Use Form 6251, reliable tax software, or a tax professional to confirm whether the AMT applies to you.