Instructions for 2023 Form 6251, Alternative Minimum Tax
This guide clarifies the mechanics of the Alternative Minimum Tax, a separate computation that may apply when certain tax benefits significantly lower regular tax.
Form 6251, “Alternative Minimum Tax – Individuals,” is used to calculate a separate, parallel tax to the regular income tax. The Alternative Minimum Tax (AMT) ensures that individuals with higher incomes who benefit from certain tax deductions pay a guaranteed minimum amount of tax. The process requires calculating tax liability twice: once under regular rules and again under the more restrictive AMT rules. If the AMT calculation results in a higher tax than the regular tax, the individual must pay the higher amount, which is determined on Form 6251 and attached to their Form 1040.
Determining if You Need to File Form 6251
For the 2025 tax year, the AMT exemption amounts are set at $88,100 for single filers and heads of household, $137,000 for those married filing jointly or for qualifying surviving spouses, and $68,500 for those married filing separately. These exemptions are the amount of income shielded from the AMT calculation.
These exemption amounts are reduced for higher-income individuals. For 2025, this income phase-out starts at $626,350 for most filers and at $1,252,700 for joint filers. For every dollar of income above these thresholds, the exemption amount is reduced by 25 cents.
Beyond income, certain financial activities may require you to file Form 6251. These include:
- The exercise of incentive stock options (ISOs).
- Having high state and local tax (SALT) deductions.
- Claiming large deductions for depreciation on property.
- Receiving tax-exempt interest from certain private activity bonds.
Required Information and Common Adjustments
The AMT calculation begins with your regular taxable income and modifies it by adding back certain deductions not permitted for the AMT. These adjustments are the primary differences between the regular tax system and the AMT system and are found in Part I of the form.
A primary adjustment relates to state and local taxes. For the AMT calculation, you must add back the state and local taxes you deducted on Schedule A, which includes state income or sales taxes and property taxes. This amount is entered on line 2a of Form 6251.
If you took the standard deduction on your Form 1040, it is not allowed for AMT purposes. The entire standard deduction amount must be added back to your income for the AMT calculation.
When you exercise incentive stock options (ISOs), the difference between the stock’s fair market value on the exercise date and the price you paid is not income for regular tax. For the AMT, this “bargain element” is considered income and must be added on line 2i of Form 6251.
The AMT also requires a slower depreciation method than is often used for regular tax. The difference between the depreciation claimed for regular tax and the allowable AMT depreciation must be calculated and added back on line 2l.
Finally, while interest from most municipal bonds is tax-exempt, interest from specified private activity bonds is taxable for AMT purposes. This interest, reported on Form 1099-INT, must be added to your income on line 2g.
How to Calculate the Alternative Minimum Tax
The calculation begins on line 1, where you enter your taxable income from line 15 of your Form 1040. You will then proceed through Part I, entering the applicable adjustments to arrive at your alternative minimum taxable income (AMTI). From your AMTI, you subtract your eligible AMT exemption amount.
The result is the income base upon which the tentative minimum tax is calculated. This amount is then subjected to the two-tiered AMT tax rate structure.
For the 2025 tax year, the first $239,100 of income above the exemption ($119,550 if married filing separately) is taxed at a 26% rate. Any income exceeding this threshold is taxed at a 28% rate. After applying these rates, you arrive at your tentative minimum tax.
The final step is to compare this tentative minimum tax with your regular tax liability. If your tentative minimum tax is greater than your regular tax, the difference is your Alternative Minimum Tax. This amount is then carried over to Schedule 2 of your Form 1040 and added to your total tax liability.
Understanding the Minimum Tax Credit
After paying Alternative Minimum Tax, you may be able to recover a portion of that payment in later years through the Minimum Tax Credit. This credit accounts for AMT adjustments that are a matter of timing. The credit is calculated and claimed using Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts.
The availability of the credit depends on the type of adjustments that caused you to owe AMT, which are categorized as “deferral items” or “exclusion items.” Deferral items, such as the adjustment for exercising ISOs or for different depreciation schedules, accelerate your tax liability but do not permanently increase it. AMT paid on these items can generate a credit.
Exclusion items represent deductions that are permanently disallowed under the AMT, such as the deduction for state and local taxes or the standard deduction. Paying AMT because of exclusion items does not generate a credit. You can only claim the Minimum Tax Credit in a future year when you are not liable for the AMT, and any unused credit can be carried forward.