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Alternative Minimum Tax


The regular tax law excludes certain kinds of income and provides deductions and credits for certain expenses. Enacted by Congress in 1969, the alternative minimum tax (AMT) attempts to ensure that individuals and corporations that benefit from certain exclusions, deductions, or credits pay at least a minimum amount of tax.

The AMT is the excess of the tentative minimum tax over the regular tax. Thus, the AMT is owed only if the tentative minimum tax is greater than the regular tax. The tentative minimum tax is figured separately from the regular tax. In general, the tentative minimum tax is computed by (1) starting with taxable income for regular tax purposes, (2) eliminating or reducing certain exclusions, deductions, and credits (generally, business-related credits) that are allowed in computing the regular tax, (3) subtracting the AMT exemption amount, (4) multiplying the amount computed in (3) by the AMT rate, and (5) subtracting AMT foreign tax credit. The AMT exemption amount and AMT rate are set by law. For capital gains and certain dividends, the rates in effect for the regular tax are used.

To find out if you may be subject to the AMT, refer to the Form 1040 Instructions and the Form 1040A Instructions. If you are filing the Form 1040, you may use the AMT Assistant for Individuals, which is an electronic version of the AMT worksheet available on the IRS website. The AMT worksheet may tell you that you do not owe the AMT or it may direct you to Form 6251 (PDF), Alternative Minimum Tax – Individuals. If you are directed to Form 6251, you will have to complete that form to determine whether you owe the AMT. Form 6251 (PDF), Alternative Minimum Tax – Individuals, is available on the IRS website. After you have completed the Form 6251, reviewWho Must File in the Form 6251 Instructions, to determine if the Form 6251 has to be submitted as an attachment to your Form 1040(PDF).

If you are not liable for AMT this year, but you paid AMT in one or more previous years, you may be eligible to take a special minimum tax credit against your regular tax this year. If eligible, you should complete and attach Form 8801 (PDF), Credit for Prior Year Minimum Tax – Individuals, Estates, and Trusts.

Source: Internal Revenue Service
Last reviewed: September 21, 2013