The Alternative Minimum Tax also known as "AMT" was enacted by Congress to ensure that individuals who benefit from certain exclusions, deductions, or credits be required to pay at least a minimum amount of tax. The AMT is the excess of the tentative minimum tax over the regular tax. This means that AMT will be owed only if the tentative minimum tax is greater than the regular tax.
How is the tentative minimum tax calculated?
The tentative minimum tax is figured by:
- Starting with taxable income for regular tax purposes,
- Eliminating or reducing certain exclusions, deductions, and credits (generally, business-related credits) that are allowed in computing regular tax,
- Subtracting the AMT exemption amount,
- Multiplying the amount computed in (3) by the AMT rate, and
- Subtracting AMT foreign tax credit.
*The AMT exemption amount and AMT rate are set by law.
In a nutshell, the Alternative Minimum Tax was created by Congress to keep wealthy individuals from using "loopholes" to avoid paying taxes. However, AMT was not designed to automatically update for inflation, more middle-class taxpayers are becoming subject to the Alternative Minimum Tax.
What are the AMT exemption amounts?
The 2022 AMT exemption amounts are:
- Single - $75,900
- Married Filing Joint - $118,100
- Married Filing Separately - $59,050
- Head of Household - $75,900
The 2021 AMT exemption amounts are:
- Single - $73,600
- Married Filing Joint - $114,600
- Married Filing Separately - $57,300
- Head of Household - $73,600
The 2020 AMT exemption amounts are:
- Single - $72,900
- Married Filing Joint - $113,400
- Married Filing Separately - $56,700
- Head of Household - $72,900
The 2019 AMT exemption amounts are:
- Single - $71,700
- Married Filing Joint - $111,700
- Married Filing Separately - $55,850
- Head of Household - $71,700
For additional information pertaining to the Alternative Minimum Tax, please refer to the instructions for Form 6251.