What is the alternative minimum tax (AMT)?

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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.

The maximum AMT tax is 28% for tax years 2018-2025. (After 2025, the changes made in the AMT are set to expire.)

Exemption amount: 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 $84,500 for 2017 (lower amounts apply to other filing statuses).  The AMT exemption amounts are adjusted for inflation.

As the result of the passage of the Tax Cuts and Jobs Act of 2017, the exemption amounts --based on your filing status-- are increased for tax years 2018 through 2025 to $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 AMT exemption amounts gradually phase out are dramatically raised: for 2018, the phaseout starts at $1 million for joint filers and $500,000 for all other filers. 

Application of AMT: 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.

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