Enter the adjustable tax income and any allowable non-refundable tax credits to determine the alternative minimum tax (AMT).

AMT Formula

The following formula is used to calculate an alternative minimum tax. 

AMT = A * (B-C) - D
  • Where AMT is the alternative minimum tax
  • A is a flat rate of 15%
  • B the adjustable tax income ($)
  • C is $40,000
  • D is non-refundable tax credits

To calculate the AMT, multiply the flat rate by the difference between the adjustable tax income and 40,000, then subtract the non-refundable tax credits from the result.

AMT Definition

What is AMT?

AMT, short for adjusted minimum tax, is a method of calculating the minimum amount a person owes in taxes based on their income.

Example Problem

How to calculate amt?

First, determine the adjustable tax income. This is the income that a person makes that is subject to taxes. For this example, the person in question earns a total of $150,000.00 per year in taxable income.

Next, determine any non-refundable tax credits. The individual in this example has $5,000 tax credits to use.

Finally, calculate the AMT using the formula above:

AMT = A * (B-C) – D

AMT = .15* (150000-40000) – 5000

AMT = $11,500.00

FAQ

What is the purpose of the Alternative Minimum Tax (AMT)?

The AMT is designed to ensure that individuals and corporations that benefit from certain tax advantages pay at least a minimum amount of tax. It prevents those with high incomes from using extensive deductions and credits to drastically lower their tax obligations.

How often should I calculate AMT?

It’s recommended to calculate AMT annually as part of your tax preparation process. This calculation is necessary to determine if you owe AMT for the tax year, based on your income, deductions, and credits for that year.

Can AMT credits be carried over?

Yes, if you’re not able to use all of your AMT credits in one tax year because your regular tax is lower than your AMT, you can carry forward the unused credits to future years. However, specific rules apply to how these credits can be used, so consulting with a tax professional is advisable.