The GOOD news is that AMT is changing, new tax rules apply to 2018 through 2025….see below

The Alternative Minimum Tax (AMT) was enacted by Congress in 1969 to prevent a small number of wealthy taxpayers from avoiding paying taxes by deducting too many expenses. Essentially, there were millionaires who were able to work the system to remove any tax liability and pay nothing to Uncle Sam. Unfortunately, when Congress passed the AMT, they did not consider inflation and phaseouts were not adjusted as the years and decades went by. Consequently, the majority of taxpayer’s that pay the AMT are now the middle class.

What is AMT and how does it work?

According to, the alternative minimum tax “recalculates income tax after adding certain tax preference items back into gross adjusted income.  It uses a separate set of rules to calculate taxable income after allowed deductions. These deductions are then added back into the taxpayer’s income to calculate their alternative minimum taxable income and then the AMT exemption is subtracted to determine the final taxable figure”.

Essentially, your taxable income is being calculated twice and I wish I could say this is to your benefit. Regretfully, no…you are paying the higher of the two calculations! AMT has its own set of rules and adds back in certain adjustments and preferences (tax breaks).

The most common adjustments that affect AMT calculations are below:

  • Standard deduction – there no deduction for AMT so this amount must be added back in for calculations.
  • Personal Exemptions -this is no longer available for AMT calculations.
  • Mortgage Interest – this is allowable on first home loan but not on a second mortgage or refinance.
  • Medical & dental expenses – the amount over 10% of adjusted gross income is deductible for AMT.
  • Investment Interest – for rental real estate and business activities, you can deduct interest up to the limits of income for the year; however, there are special rules for AMT that add in preferences and these are calculated with Form 8582, Passive Activity Loss Limitations.
  • Tax Refund – this is no longer included as income for AMT.
  • Taxes – no taxes are deductible for AMT.

Preferences are always added back into AMT calculations and listed below:

  • Depletion – if depletion is greater than the adjusted basis, difference is added back.
  • Excess Intangible drilling costs – the amount that is greater than 65% of taxpayer’s net income is added back.
  • Interest on private activity bonds – this is excluded from regular tax but added back here.
  • Accelerated depreciation on property placed in service before 1987 – the amount that is in excess if straight line depreciation were applied is added back in.
  • Exclusion of gain on qualified small business stock – 7% of the gain is added back.

The GOOD news is that AMT is changing, new tax rules apply to 2018 through 2025….

The first change was that the AMT exemption was increased significantly in 2018. Secondly, the income levels for the phase out are MUCH higher than they were in the past. (see the table below). The new tax law in 2018 was a 26.9% increase for each filing status.

Filing Status

Tax Cuts & Jobs Act,

2018 Exemptions

Phase Out Range

Single, HOH



MFJ, surviving spouse







AMT has only two tax rates:

  • 26% rate is paid on the first $191,000 of income
  • 28% rate is paid on higher than $191,000 of income

Many taxpayers will now see their regular tax calculation and their AMT calculation being equal to each other and will no longer be subject to the AMT.

Corporate Federal AMT has been permanently repealed, effective for tax years after December 31, 2017. The new tax law allows any remaining AMT credit to offset the regular tax liability for any taxable year. The taxpayer can also eliminate their regular tax liability and receive a refund of 50% of the remaining credit for taxable years beginning after 2017 and before 2021. Any unused credit after that is fully refunded.

If you have any questions or need help knowing how to minimize this tax for yourself, please feel free to give our office a call. We are happy to help!

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