Good news: The number of taxpayers subject to the AMT is expected to drop dramatically in tax years 2018 through 2025, due to higher exemptions and phase-out thresholds. The AMT calculation is complicated. Review Form 6251 Alternative Minimum Tax - Individuals for the exact calculation.
How is AMT calculated?
The AMT calculation is complicated and beyond the scope of this article, but here’s an outline of how it works:
- We start by figuring your AMT income (your AMTI) by adding certain deductions back into to your AGI. (This is the part that’s too complicated to explain here.)
- Then we subtract your AMT exemption from your AMTI.
- The result is then multiplied by the AMT tax rate to come up with your alternative tax.
- If your alternative tax is less than your regular tax, you’re exempt from paying it (most taxpayers fall into this group).
- If your alternative tax is more than your regular tax, you have to pay the difference. We account for this in your final tax refund or taxes owed amount – you don’t pay it separately.