What Are the Alternative Minimum Tax Brackets and Rates?

The Alternative Minimum Tax (AMT) is a parallel tax system that operates alongside the regular federal income tax. Its purpose is to ensure that high-income individuals and corporations pay a minimum amount of tax by disallowing certain deductions and credits, which creates a separate taxable income base. Taxpayers must calculate their liability under both systems and pay the greater of the two amounts. The Tax Cuts and Jobs Act of 2017 (TCJA) significantly increased the AMT exemption amounts, reducing the number of taxpayers subject to it.

Current AMT Exemption Amounts and Tax Rates

The tax code provides an AMT exemption, which is an amount of income a taxpayer can shield from the calculation. For the 2025 tax year, the exemption amount is $88,100 for single filers and heads of household, and $137,000 for those married filing jointly. For married individuals filing separate returns, the 2025 exemption is $68,650.

This exemption is not available to all high-income taxpayers, as it is subject to a phaseout. The phaseout begins when Alternative Minimum Taxable Income (AMTI) reaches a certain threshold. For 2025, this threshold is $626,350 for single filers and $1,252,700 for married couples filing jointly. For every dollar of AMTI above these thresholds, the exemption amount is reduced by 25 cents, eventually phasing out completely for the highest earners.

Unlike the seven-bracket regular income tax system, the AMT has a two-tiered rate structure. For 2025, a 26% rate applies to AMTI above the exemption amount, up to a specific threshold. Once AMTI surpasses this threshold, a 28% rate applies to the excess income. For 2025, the income level where the rate switches from 26% to 28% is $239,100 for all filing statuses except for married couples filing separately, for whom the threshold is $119,550.

Common AMT Adjustments and Preferences

Calculating the AMT starts with regular taxable income, which is then modified by a series of adjustments and preferences. These items are treated differently for AMT than for regular tax and are added back to taxable income to compute Alternative Minimum Taxable Income (AMTI). Common adjustments and preferences that can trigger the AMT include:

• State and local taxes (SALT): The deduction for state and local income, sales, and property taxes is not allowed under the AMT. The full amount must be added back when calculating AMTI.
• Incentive Stock Options (ISOs): When an ISO is exercised, the difference between the stock’s fair market value and the exercise price is not income for regular tax. For AMT, this “bargain element” is considered income in the year of exercise.
• Private-activity bonds: Tax-exempt interest from certain private-activity bonds must be included in the AMTI calculation.
• The standard deduction: If a taxpayer claims the standard deduction, it is not allowed for AMT and must be added back to income.
• Depreciation: Depreciation on certain business property may need to be recalculated using a slower method for AMT, resulting in a smaller deduction and a positive adjustment to AMTI.

How to Calculate the AMT

The process for determining if a taxpayer owes AMT is outlined on IRS Form 6251, Alternative Minimum Tax. This form guides the calculation of a tentative minimum tax to compare against the regular tax liability.

The first step is to take the taxable income from the taxpayer’s regular tax return, such as Form 1040. From there, the taxpayer must add back the various adjustments and preferences that are disallowed under AMT rules.

After adding back all applicable adjustments, the result is the Alternative Minimum Taxable Income (AMTI). The next step is to subtract the appropriate AMT exemption amount for the taxpayer’s filing status, keeping in mind the phaseout rules. The remaining amount is the tax base to which the two-tiered AMT rates of 26% and 28% are applied, which yields the tentative minimum tax.

The final step is a direct comparison. The taxpayer compares their tentative minimum tax to their regular tax liability. If the tentative minimum tax is higher than the regular tax, the difference is the Alternative Minimum Tax owed. This amount is then added to the regular tax on their Form 1040.

The Minimum Tax Credit

Paying the Alternative Minimum Tax in one year can generate a credit that may reduce a taxpayer’s regular tax liability in future years. This is known as the minimum tax credit and is calculated using IRS Form 8801, Credit for Prior Year Minimum Tax. The credit is designed to prevent double taxation on income that is taxed earlier under AMT rules than it is under regular tax rules.

The availability of the credit depends on the type of adjustments and preferences that triggered the AMT. The tax code distinguishes between “deferral” items and “exclusion” items. Deferral items, such as the adjustment for exercising incentive stock options or different depreciation schedules, cause a temporary difference in taxable income that reverses over time. Exclusion items, like the deduction for state and local taxes or the standard deduction, create a permanent difference in taxable income.

The minimum tax credit is only generated by the AMT paid on deferral items. This is because the income from these items will eventually be taxed under the regular tax system, and the credit ensures it is not taxed a second time. The credit cannot be used to reduce a future AMT liability, only a regular tax liability. Any unused portion of the credit can be carried forward indefinitely to subsequent tax years.