8574 / What is the alternative minimum tax and how is it calculated?

Editor’s Note: The 2017 tax reform legislation temporarily increased the AMT exemption amount for tax years beginning after December 31, 2017 and before December 31, 2026.¹

In addition to regular income tax, the alternative minimum tax (AMT) is an additional tax that certain taxpayers must pay. In theory, the purpose of AMT is to prevent high income taxpayers from taking advantage of tax benefits (such as exclusions, deductions and credits) to substantially reduce or even eliminate their tax liability. However, in reality, due to complex rules, many relatively low income taxpayers may become subject to AMT.

The AMT is calculated as follows:

(1) compute alternative minimum taxable income (AMTI, see Q 8576);