Alternative Minimum Tax (AMT)
The Alternative Minimum Tax (AMT) is a parallel tax system that adds back certain preference items and adjustments to regular taxable income, ensuring high-income taxpayers pay a minimum amount of tax regardless of deductions and credits.
Exam Tip
AMT adds back preference items to regular taxable income. Key triggers: SALT, ISO exercise, private activity bonds. Two rates: 26% and 28%. Exemption phases out at 25 cents per dollar.
What is the Alternative Minimum Tax?
The AMT is a separate tax calculation that runs parallel to the regular tax system. Taxpayers pay the HIGHER of regular tax or AMT.
2025 AMT Exemptions and Phase-Outs
| Filing Status | Exemption | Phase-Out Begins |
|---|---|---|
| Single | $88,100 | $626,350 |
| MFJ | $137,000 | $1,252,700 |
| MFS | $68,500 | $626,350 |
Common AMT Preference Items
| Item | AMT Treatment |
|---|---|
| SALT deduction | Added back entirely |
| ISO exercise spread | Added to AMTI |
| Private activity bond interest | Added to AMTI |
| Accelerated depreciation | Recalculated using ADS |
| Standard deduction | Not allowed for AMT |
AMT Tax Rates
| Rate | AMTI Range |
|---|---|
| 26% | Up to $239,100 ($119,550 MFS) |
| 28% | Above $239,100 |
Exam Alert
AMT adds back preference items (SALT, ISO spread, private activity bonds). Two rates: 26% and 28%. Exemption phases out at 25 cents per dollar. ISO exercise is the most commonly tested AMT trigger on the EA exam.
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Related Terms
Adjusted Gross Income (AGI)
Adjusted Gross Income (AGI) is gross income minus above-the-line deductions (adjustments to income). AGI is the key threshold used to determine eligibility for many tax credits, deductions, and phase-outs on Form 1040.
Itemized Deductions
Itemized deductions are specific expenses taxpayers can deduct from adjusted gross income instead of the standard deduction, including state and local taxes, mortgage interest, charitable contributions, and certain medical expenses.
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