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

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);

(2)  subtract the exemption amount from AMTI; and

(3)  multiply the remaining AMTI (step (2), above), by the applicable AMT rate.

For purposes of sheltering lower income taxpayers from being subject to AMT, the Code exempts certain amounts of income. Only AMTI in excess of the exemption amount is subject to AMT. The 2025 exemption amounts are as follows:²

Filing Status	AMT Exemption
Married filing jointly or qualifying widow(er)	$137,000
Married filing separately	$68,500
Single or Head of Household	$88,100
Estates and Trusts	$30,700

A 28 percent AMT rate applies to excess taxable income. In 2025, the 28 percent rate applies to excess taxable income above $119,550 for married taxpayers filing separately and $239,100 for joint returns, individual returns and estates and trusts. In 2024, the 28 percent rate applies to excess taxable income above $116,300 for married taxpayers filing separately and $232,600 for joint returns, individual returns and estates and trusts. In 2023, the 28 percent rate applied to excess taxable income above $110,350 for married taxpayers filing separately and $220,700 for joint returns, individual returns and estates and trusts. In 2022, the amounts were $103,050 for married taxpayers filing separately and $206,100 for joint returns, individual returns and estates and trusts.³

For purposes of computing AMT, the taxpayer is allowed to take the foreign tax credit and certain other credits (see Q 8573).⁴ After computing AMT, the AMT amount is compared with the taxpayer’s regular income tax liability. If the regular tax is lower than AMT, the difference is AMT that is owing in addition to the tax. Stated differently, the taxpayer must pay the higher of the AMT or the regular tax.⁵

Example: For 2025, Asher’s regular income tax liability is $75,000 but his AMT tax liability is $95,000, or $20,000 more than his regular income tax liability. Asher’s liability is $95,000 ($75,000 regular income tax and $20,000 AMT).