Alternative minimum tax 2024-2025: What it is and who has to pay
The alternative minimum tax, or AMT, is a separate tax system that runs parallel to our regular income tax system.
What is AMT?
The AMT applies to a relatively few number of high-income taxpayers. It’s essentially a second method for calculating taxes, aimed at closing loopholes that allow people to reduce or eliminate their tax bills under the standard income tax system.
How the AMT works
Unlike the seven federal income tax brackets, the AMT has only two tax rates: 26 percent and 28 percent. Determining the applicable rate depends on a taxpayer’s AMT taxable income, and requires a separate calculation from regular federal income tax using IRS Form 6251. You’ll pay the higher of the two tax bills.
The AMT adds back certain types of income that are not taxed under the standard income tax rates, and rejects or reduces some common tax deductions used by taxpayers to lower their tax bills.
The alternative minimum tax was enacted in 1969 to ensure that high-income taxpayers pay a minimum tax. The AMT applies to fewer taxpayers now thanks to the 2017 Tax Cuts and Jobs Act (TCJA), which limited its scope by using higher income thresholds for the AMT exemption.
There are about 200,000 AMT taxpayers now, versus more than 5 million in 2017, according to the Tax Policy Center. But the provisions of the TCJA are set to expire at the end of 2025, and unless changes are enacted by Congress, the AMT will once again apply to millions of taxpayers.
Who has to pay the AMT?
For most taxpayers with moderate incomes, determining whether you have to pay the AMT is fairly straightforward: If your taxable income is less than the AMT exemption amount below, then you probably don’t owe this tax.
However, the AMT does compute taxable income differently, so you can confirm whether this tax will apply after completing IRS Form 6251.
AMT exemption amounts for 2024
You may need to pay the AMT for 2024 if you earned more than the minimum level in the chart below. But keep in mind that earning more than these levels doesn’t automatically subject you to the AMT.
| Filing status | 2024 AMT exemption amount |
|---|---|
| Single or head of household | $85,700 |
| Married, filing separately | $66,650 |
| Married, filing jointly | $133,300 |
AMT exemption amounts for 2025
You may need to pay the AMT for 2025 if you earned more than the minimum level in the chart below. But earning more than these levels doesn’t automatically subject you to the AMT.
| Filing status | 2025 AMT exemption amount |
|---|---|
| Single or head of household | $88,100 |
| Married, filing separately | $68,500 |
| Married, filing jointly | $137,000 |
How to calculate how much AMT you owe
Anyone who exceeds the income levels in the above charts may be subject to the alternative minimum tax. However, reaching those levels doesn’t automatically trigger the AMT.
To determine whether you owe the AMT, you need to complete IRS Form 6251 by hand, use a tax software program or hire a professional tax preparer.
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If you do have to pay the AMT, Form 6251 will also help you calculate the amount of tax you owe.
The IRS has set income levels to determine which AMT tax rate applies to you. If your income is less than the stated level in the charts below, and greater than the aforementioned exemption levels, you’re taxed at 26 percent. If your income is over the stated level below, you’re taxed at a rate of 28 percent.
| Filing status | 2024 AMT tax rate income level |
|---|---|
| Single or head of household | $232,600 |
| Married, filing separately | $116,300 |
| Married, filing jointly | $232,600 |
| Filing status | 2025 AMT tax rate income level |
|---|---|
| Single or head of household | $239,100 |
| Married, filing separately | $119,550 |
| Married, filing jointly | $239,100 |
For example, a single person who earned more than $85,700 in 2024, but less than $232,600, could be taxed at the 26 percent AMT rate. If that person earned more than $232,600, the AMT tax rate goes up to 28 percent.
The AMT exemption — the amount of income taxpayers can exempt before triggering AMT — eventually phases out at 25 cents per dollar earned once income has reached the thresholds in the charts below.
| Filing status | 2024 AMT phaseout threshold |
|---|---|
| Single or head of household | $609,350 |
| Married, filing separately | $609,350 |
| Married, filing jointly | $1,218,700 |
| Filing status | 2025 AMT phaseout threshold |
|---|---|
| Single or head of household | $626,350 |
| Married, filing separately | $626,350 |
| Married, filing jointly | $1,252,700 |
How the AMT can affect your eligibility for tax breaks
With the AMT, many of the items you might deduct for your regular taxes no longer apply. Under the AMT:
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You can’t claim the standard deduction. The AMT is based on the exemption amounts noted above.
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You can’t claim the state and local taxes (SALT) deduction (which means you can’t deduct your property taxes).
Additional items that are treated differently under the AMT are:
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Incentive stock options.
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Excess intangible drilling costs.
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Tax-exempt interest from certain private activity bonds.
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Depletion and accelerated depreciation on certain leased personal or real property.
Bottom line
Determining your AMT liability is complicated. A tax software program or a tax professional may be the best way to determine what you owe.
