TAXES > Individuals > Other Taxes > Alternative Minimum Tax (Form 6251)

Alternative Minimum Tax

The alternative minimum tax is the excess of the tentative minimum tax over the regular tax and prevents a taxpayer with substantial income from avoiding significant tax liability through the use of exclusions, deductions, and credits. For a taxpayer filing other than married separately, the tentative minimum tax is 26% of the "taxable excess" that doesn't exceed $175,000, plus 28% of the taxable excess above $175,000, reduced by the AMT foreign tax credit for the tax year. "Taxable excess" is the excess of alternative minimum taxable income for the tax year over the "exemption amount" of $175,000 ($87,500 for maried filing separately). Alternative minimum taxable income is taxable income plus or minus various "adjustments," plus tax preferences

The exempt portion of alternative minimum taxable income (AMTI) is:

married individuals filing jointly and surviving spouses: $45,000, less 25% of AMTI exceeding $150,000 (zero exemption when AMTI income is $330,000), unmarried individuals: $33,750, less 25% of AMTI exceeding $112,500 (zero exemption when AMTI is $247,500), and married individuals filing separately, estates and trusts: $22,500, less 25% of AMTI exceeding $75,000. But AMTI of married individuals filing separately must be increased by the lesser of $22,500 or 25% of the excess of AMTI (before considering this increase) over $165,000. In no case can the exemption amount be less than zero. Where a child is subject to the "kiddie tax", the child's AMT exemption amount may not exceed the child's earned income for the tax year plus $5,000 for 1998 ($5,100 for 1999). But the exemption computed under this limit can't be more than the child's regular AMT exemption ($33,750 before phaseout).

AMT adjustments differ from preferences. Adjustments involve a substitution of AMT treatment of an item for the regular tax treatment. A preference involves the addition of the difference between the AMT treatment and the regular tax treatment. Some (but not all) adjustments can be negative amounts, i.e., they may result in alternative minimum taxable income that's less than taxable income. Tax preferences can't be negative amounts.