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Tax Topics

Tax Topics

2009 Tax Stimulus
2012 Election Tax Plans
2015 Budget
Alternative Minimum Tax (AMT)
American Jobs Act of 2011
Brief Description of the Model 2013
Camp Tax Reform Plan
Current-Law Distribution of Taxes
Deficit Reduction Proposals
Distribution of the 2001 - 2008 Tax Cuts
Earned Income Tax Credit
Economic Stimulus
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Expiration of the Bush Tax Cuts
Explanation of Income Measures 2013
Federal Budget
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Flow-Through-Enterprises
Guide to TPC Tables
Health Insurance Tax Incentives
Homeownership
How to Interpret Distribution Tables 2013
Marriage Penalties
Model FAQ 2013
Model Related Resources and FAQs
Payroll Taxes
Presidential Transition - 2009
Recent Tax Stimulus Legislation
Retirement Saving
Tax Encyclopedia Index
Tax Expenditures
Tax Reform Proposals
Value-Added Tax (VAT)
Who Doesn't Pay Federal Taxes?
Working Families

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Alternative Minimum Tax (AMT)
  • The AMT operates parallel to the regular tax and sets a floor on total tax liability. Taxpayers whose income exceeds the AMT exemption must calculate both regular tax and AMT liabilities and pay the larger amount.
  • First enacted in 1969 to prevent excessive tax avoidance by high income taxpayers, the AMT has changed several times to become a tax that hits, or affects, many upper middle income taxpayers.
    Source: Historical AMT Legislation.
  • The number of taxpayers owing the AMT grew from about 20,000 in 1970 to roughly 4.3 million in 2011. TPC projects that there will be 3.9 million AMT taxpayers in 2013.
    Source: Baseline Distribution of Income and Federal Taxes, 2004-2024.

    AMT-TT-page-graph

  • AMT liability is based on alternative minimum taxable income (AMTI), which equals adjusted gross income (AGI) minus itemized deductions plus AMT preference items. Preference items include the deduction of state and local taxes and miscellaneous itemized deductions, part of itemized medical expenses (for taxpayers age 65 or older), and certain other items that reduce regular taxable income.
  • Taxpayers do not owe AMT if their AMTI is less than the relevant AMT exemption ($51,900 for single taxpayers and $80,800 for married taxpayers in 2013). If AMTI exceeds those amounts, taxpayers must calculate their tentative AMT liability to see if they owe the additional tax.
  • AMT exemptions phase out at a 25 percent rate if alternative minimum taxable income (AMTI) exceeds $115,400 for single taxpayers and $153,900 for married couples. As a result, single taxpayers with AMTI over $323,000 and couples with AMTI over $477,100 lose all of the exemption.
  • The AMT has two tax rates: 26 percent and 28 percent. Tentative AMT equals 26 percent of the first $179,500 of AMTI over the exemption amount plus 28 percent of any remaining AMTI.
  • The American Taxpayer Relief Act (ATRA) set permanent AMT exemption amounts and indexed them for inflation. Between 2001 and 2011, Congress set temporary exemption amounts that had to be renewed periodically to prevent them from reverting to their lower, permanent values.
  • The percentage of tax units who pay the AMT varies with income. In 2013, the majority of tax units with expanded cash income between $500 thousand and $1 million had some AMT liability. In contrast, fewer than 2 percent of tax units with ECI under $200 thousand owed AMT.
    Source: Characteristics of AMT Taxpayers, 2012-2014, 2023.
  • Low and middle income tax units rarely owe AMT because the AMT exemption is high, relative to their income. Tax units with very high income generally avoid the AMT because their regular income tax rate exceeds the top AMT tax rate.
  • Because the AMT does not allow taxpayers to take advantage of particular tax preferences (AMT preferences), those who benefit from those preferences are more likely to owe AMT.

Also see AMT Quick Facts

Further Reading

How the New Tax Affects the Alternative Minimum Tax Roberton Williams, TaxVox, 2013.

Who Itemizes Deductions? Benjamin Harris and Daniel Baneman, Tax Notes Tax Fact, 2011.

The Individual Alternative Minimum Tax: Historical Data and Projections Katherine Lim and Jeff Rohaly, 2009.

The Individual Alternative Minimum Tax (AMT): 12 Facts and Projections Len Burman, Julianna Koch, Greg Leiserson, and Jeff Rohaly, 2008.

The Expanding Reach of the Individual Alternative Minimum Tax Len Burman, William Gale, and Jeff Rohaly, 2005.

Suppose They Took the AM Out of AMT? Len Burman and David Weiner, 2005.

See posts about the AMT on TaxVox, TPC's blog

See all publications related to the AMT

See all estimates related to the AMT

See all tax facts related to the AMT