The AMT is an "alternative" tax which TurboTax calculates behind-the-scenes, along with your regular federal tax. If the alternate method results in a higher tax than the regular method, you pay the difference on top of your regular tax.
Common reasons for getting hit with the AMT include:
- Exercising or selling ISOs (incentive stock options)
- Deducting interest from a large second mortgage for a house boat or recreational vehicle
- Realizing a large capital gain (for example, when you sell a home or other investments for a profit)
- Having a household income greater than the phase-out thresholds while also having a significant amount of itemized deductions
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