Tax Facts

8576 / How is alternative minimum taxable income (AMTI) computed?

Alternative minimum taxable income (AMTI) is taxable income, with adjustments made in the way certain items are treated for AMT purposes, increased by tax preference items.1

Except as otherwise provided below and in Q 8577 and Q 8578, the provisions that apply in determining the regular taxable income of a taxpayer also generally apply in determining the AMTI of the taxpayer.2 In addition, references to a non-corporate taxpayer’s adjusted gross income (AGI) or modified AGI in determining the amount of items of income, exclusion, or deduction must be treated as references to the taxpayer’s AGI or modified AGI as determined for regular tax purposes.3

The following chart is a non-exclusive comparison of the different treatment of certain items in the computation of regular income tax as compared to the computation of AMT:4

Item Regular Income Tax Computation AMT Computation
Standard deduction (taxpayer does not itemize) Allowed Not allowed
Phase out of itemized deductions (N/A for 2018-2025) Phased out if AGI exceeds applicable thresholds No phase out
Medical Expenses Allowed as itemized deductions to the extent they exceed 7.5% of AGI Same
Taxes State income taxes, property taxes, etc. allowed as itemized deductions (subject to $10,000 cap in 2018-2025) Not allowed
Home Mortgage Interest Allowed (subject to limitations) Allows only acquisition indebtedness including loans taken to improve principal residence or second home. Interest attributed to refinanced amounts in excess of original loan not allowed.
State Tax Refund Included in gross income if previously deducted as itemized deduction Since state taxes are not allowed as a deduction, refunds are not included in income. Amount of regular income entered as a negative amount.
Interest expense related to tax-exempt interest income Not allowed Allowed if interest expense is related to tax-exempt private activity bonds
Miscellaneous itemized deductions (N/A for 2018-2025) Allowed to the extent they exceed 2% of AGI assuming the taxpayer itemizes Not allowed
Qualified stock options Exercise of a qualified stock option not taxable Difference between amount paid to acquire the stock and the FMV of the stock is included as AMTI income
Tax-exempt income Not included in gross income Included in AMTI income

1.  IRC § 55(b)(2).

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