Topic 556 - Alternative Minimum Tax

The regular tax law excludes certain kinds of income and provides deductions and credits for certain expenses. 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) computing taxable income eliminating or reducing certain exclusions and deductions, and taking into account differences with respect to when certain items are taken into account in computing regular taxable income and alternative minimum taxable income (AMTI), (2) subtracting the AMT exemption amount, (3) multiplying the amount computed in (2) by the appropriate AMT tax rates, and (4) subtracting the AMT foreign tax credit. The AMT exemption amounts and AMT tax rates are set by law. For net capital gains and certain dividends, the special capital gain rates in effect for the regular tax are used if they are lower than the AMT tax rates that would otherwise apply. In addition, some tax credits allowed in reducing regular tax liability are not allowed in reducing AMT liability.

To find out if you may be subject to the AMT, refer to the Form 1040 Instructions (PDF) and the Form 1040A Instructions (PDF). 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, review Who Must File in the Form 6251 Instructions (PDF), 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.

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Page Last Reviewed or Updated: February 27, 2014