Under the tax law, certain tax benefits can significantly reduce a taxpayer’s regular tax amount. The alternative minimum tax (AMT) applies to taxpayers with high economic income by setting a limit on those benefits. It helps to ensure that those taxpayers 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, compute the tentative minimum tax by:
- 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),
- subtracting the AMT exemption amount,
- multiplying the amount computed in (2) by the appropriate AMT tax rates, and
- subtracting the AMT foreign tax credit.
The law sets the AMT exemption amounts and AMT tax rates. Taxpayers can use the special capital gain rates in effect for the regular tax if they are lower than the AMT tax rates that would otherwise apply. In addition, some tax credits that reduce regular tax liability do not reduce AMT tax 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 Form 1040 (PDF), U.S. Individual Income Tax Return, you may use the AMT Assistant for Individuals tool. The AMT tool may tell you that you do not owe the AMT or it may direct you to Form 6251 (PDF), Alternative Minimum Tax - Individuals. If it directs you to Form 6251, you will have to complete that form to determine if you owe the AMT. After you have completed the Form 6251, review Who Must File in the Form 6251 Instructions (PDF), to determine if you must submit Form 6251 as an attachment to your Form 1040.
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, to claim the minimum tax credit.
Page Last Reviewed or Updated: October 10, 2016