What is the alternative minimum tax (AMT)?
The alternative minimum tax (or the AMT) -- which is hitting a growing number of Americans--is a separate tax computation that, in effect, reduces the benefit of certain deductions and credits, thus creating a tax liability for an individual who would otherwise pay little or no tax. The purpose of AMT is to ensure that wealthier taxpayers do pay some tax.
You may have to pay the alternative minimum tax if your taxable income for regular tax purposes, plus any of the adjustments and preference items that apply to you, is more than a specified exemption amount, for married and surviving spouses, the amount is $83,800 for 2016 and $84,500 for 2017 (lower amounts apply to other filing statuses). In other words, the AMT operates under many different rules than its counterpart. The AMT exemption amounts are adjusted for inflation.
Exemption amounts are increased for tax years 2018 through 2025 by operation of the Tax Cuts and Jobs Act of 2017; beginning 2026, the exemption amounts revert to pre-2018 levels. The 2018 exemption amounts are $70,300 for single filers, $109,400 for married taxpayers filing a joint return, and $54,700 for married filing separately. Additionally, the income levels at which the exemption amounts begin to phase out are increased.
AMT does not apply to every taxpayer who makes more than the exemption amount. It’s a combination of your itemized deductions, above the line deductions, and credits that can trigger AMT. A taxpayer whose deductions and credits fall within normal limits would be unlikely to trigger AMT. A taxpayer with extraordinarily high deductions and credits might trigger AMT.
To determine if you may be subject to the alternative minimum tax, see the Form 1040 instructions or refer to Form 6251, Alternative Minimum Tax - Individuals.