1. What is Alternative Minimum Tax?

The Alternative Minimum Tax (AMT) is a parallel tax system designed to ensure that high-income individuals, corporations, estates, and trusts pay at least a minimum amount of tax, regardless of deductions, credits, or exemptions.

2. How Does the Calculator Work?

The calculator uses the AMT equation:

Where:

• \( AMTI \) — Alternative Minimum Taxable Income
• \( Exemption \) — AMT exemption amount
• \( AMT\ Rate \) — 26% or 28% depending on income level
• \( Tentative\ Minimum\ Tax\ Credit \) — Any available AMT credits

Explanation: The AMT calculation starts with taxable income, adds back certain deductions, subtracts the exemption amount, applies the AMT rate, and then subtracts any available credits.

3. Importance of AMT Calculation

Details: Calculating AMT is crucial for tax planning as it may result in higher tax liability than regular income tax for some taxpayers, particularly those with high incomes and significant deductions.

4. Using the Calculator

Tips: Enter AMTI (after all AMT adjustments), applicable exemption amount, select the correct AMT rate (26% or 28%), and include any tentative minimum tax credits.

5. Frequently Asked Questions (FAQ)

Q1: Who needs to pay AMT?
A: Taxpayers whose tentative minimum tax exceeds their regular tax liability must pay AMT. This often affects higher-income taxpayers with many deductions.

Q2: What's the difference between 26% and 28% rates?
A: The 26% rate applies to AMTI up to the threshold amount ($206,100 for 2023 for single filers), and 28% applies to amounts above that.

Q3: How is AMTI calculated?
A: AMTI starts with regular taxable income and adds back certain "preference items" like state/local tax deductions and some miscellaneous deductions.

Q4: What is the AMT exemption amount?
A: For 2023, $81,300 for single filers and $126,500 for married filing jointly. It phases out at higher income levels.

Q5: Can AMT credits be carried forward?
A: Yes, AMT credits from paying AMT in prior years can generally be carried forward to offset regular tax in future years.