AMT Calculator
The Alternative Minimum Tax is a parallel tax system that limits the benefit of certain deductions and credits. This calculator estimates your AMTI, applies the phased exemption, computes tentative minimum tax at the 26%/28% rates, and tells you whether you owe AMT on top of your regular income tax. Supports 2024, 2025 and 2026 tax years with the correct IRS parameters for each.
What is the Alternative Minimum Tax?
The Alternative Minimum Tax is a parallel federal income tax calculation that runs alongside the ordinary income tax. Congress created it in 1969 after discovering that 155 very high-income individuals had paid zero federal tax by stacking deductions. AMT eliminates or limits many of the deductions allowed under the regular tax code, adds back certain preference items, and then applies its own flat rates (26% and 28%) to the result. You owe AMT only if that parallel calculation produces a number higher than your regular tax - and only the excess is owed on top. Because the AMT is not indexed the same way as ordinary brackets, and because of SALT deduction add-backs, many upper-middle-income households in high-tax states can be affected even without exotic tax strategies.
How AMT is calculated: the five steps
The calculation follows five sequential steps. First, start with your regular taxable income (Form 1040, line 15). Second, add back all AMT preference items - most importantly, the entire SALT deduction you claimed, the bargain element on unexercised ISO stock options held past year-end, miscellaneous itemized deductions subject to the 2% floor, and any accelerated depreciation or percentage-depletion excess. The result is your Alternative Minimum Taxable Income (AMTI). Third, subtract your filing-status-specific AMT exemption, reduced by 25 cents per dollar (50 cents in 2026 under OBBBA) of AMTI above the phaseout threshold; this gives you the AMT base. Fourth, apply 26% to the first $239,100 of AMT base (2025) and 28% to everything above that to get the tentative minimum tax. Fifth, compare to your regular tax: you owe AMT only to the extent the tentative minimum tax exceeds the regular tax.
ISO stock options and AMT: the phantom income problem
Incentive stock options (ISOs) are the most dangerous AMT trigger for employees at tech and biotech companies. When you exercise ISOs and hold the shares past December 31, you pay no regular income tax that year - but the bargain element (fair market value minus strike price, times shares) is added to income for AMT purposes. This can generate a large tax bill with no cash to cover it if the stock price later falls. However, the AMT paid because of ISOs is not lost: it generates an AMT credit (Form 8801) that can offset regular tax in future years once the ISO shares are sold. If you have a large ISO exercise planned, model both the AMT cost and the credit recovery before deciding how many options to exercise in a single year.
SALT deductions and AMT: why high-tax states matter
The state and local tax deduction is the most common AMT trigger for middle-income earners. Under the regular tax code, you can deduct up to $10,000 in state and local taxes (the TCJA cap, raised to $40,000 under OBBBA for 2025-2029). Under AMT, that deduction is entirely disallowed - every dollar of SALT you claimed is added back to your income. In a high-tax state such as California, New York, or New Jersey, the combination of a high SALT deduction and relatively high income can push you into AMT territory even without any exotic planning. The solution is rarely to reduce state taxes; instead, knowing you face AMT lets you make better decisions about other deductions and timing of income recognition.
AMT exemptions and phaseout thresholds by tax year
| Tax year | Filing status | Exemption | Phaseout begins | Phaseout complete |
|---|---|---|---|---|
| 2024 | Single / HoH | $85,700 | $609,350 | $952,150 |
| 2024 | Married Filing Jointly | $133,300 | $1,218,700 | $1,751,900 |
| 2024 | Married Filing Separately | $66,650 | $609,350 | $876,250 |
| 2025 | Single / HoH | $88,100 | $626,350 | $978,750 |
| 2025 | Married Filing Jointly | $137,000 | $1,252,700 | $1,800,700 |
| 2025 | Married Filing Separately | $68,500 | $626,350 | $900,350 |
| 2026 | Single / HoH | $90,100 | $500,000 | $680,200 |
| 2026 | Married Filing Jointly | $140,200 | $1,000,000 | $1,280,400 |
| 2026 | Married Filing Separately | $70,100 | $500,000 | $640,200 |
Exemptions are subtracted from AMTI before applying AMT rates. Phaseout reduces the exemption by 25 cents per dollar above the threshold (50 cents in 2026 under OBBBA).
Frequently asked questions
Who typically owes AMT?
AMT most commonly affects higher-income individuals and households with large preference items such as significant SALT deductions (especially in high-tax states), ISO stock option exercises, accelerated depreciation, or substantial miscellaneous itemized deductions. The inflation-adjusted exemptions under the Tax Cuts and Jobs Act significantly reduced the number of middle-income taxpayers affected, but the 2026 OBBBA changes lower the phaseout thresholds and double the phaseout rate, which may bring more high earners back into AMT territory.
What is the AMT exemption and how does the phaseout work?
The AMT exemption is a flat dollar amount subtracted from your AMTI before AMT rates apply. For 2025, the exemption is $88,100 for single filers and $137,000 for married filing jointly. Once your AMTI exceeds the phaseout threshold ($626,350 single / $1,252,700 MFJ in 2025), the exemption shrinks by 25 cents for every dollar above the threshold. For 2026, the phaseout starts earlier ($500,000 single / $1,000,000 MFJ) and the reduction rate doubles to 50 cents per dollar, meaning high earners lose the exemption much more quickly.
What is AMTI and how is it different from regular taxable income?
Alternative Minimum Taxable Income (AMTI) is your regular taxable income with certain deductions and credits added back in. The most significant add-backs are: the entire state and local tax (SALT) deduction you claimed; the bargain element on incentive stock options exercised but not sold in the same year; miscellaneous itemized deductions subject to the 2% floor; and certain accelerated depreciation. Because AMT eliminates these benefits, you effectively pay tax on a larger income base - which is why the rates of 26% and 28% can still generate more tax than the progressive ordinary-income brackets in some cases.
If I pay AMT because of ISO exercises, is the money gone?
No. AMT paid because of ISO exercises that represent deferral preferences (as opposed to exclusion preferences like SALT) generates an AMT credit (Form 8801). This credit can be carried forward indefinitely and used to reduce regular income tax in future years. In the year you sell the ISO shares, the bargain element shifts from AMT income to regular income, which typically allows the accumulated AMT credit to offset a portion of that year's regular tax.
How do the 2026 OBBBA changes affect AMT?
The One Big Beautiful Budget Act (OBBBA) made two significant AMT changes for 2026. First, the phaseout thresholds drop from roughly $626,350/$1,252,700 to $500,000/$1,000,000 for single/joint filers. Second, the phaseout rate doubles from 25% to 50%, meaning the exemption phases out twice as fast once AMTI exceeds the new lower thresholds. These changes increase AMT exposure for higher earners. The 2025 parameters remain more favorable, so timing large preference items in 2025 rather than 2026 can reduce AMT exposure.
Why does this calculator show AMT even when I enter only regular income with no preference items?
This most likely happens when your regular income is very high and you entered zero for regular income tax paid, causing the calculator to estimate your regular tax from the ordinary brackets. In some edge cases the estimated regular tax may differ from your actual liability (e.g., if you have significant capital gains taxed at preferential rates, or large credits). Try entering your actual regular tax from your prior return or tax software for a more accurate comparison.
Can I reduce my AMT exposure through planning?
Several strategies can help. For ISOs, spreading exercises across multiple years limits the annual bargain element add-back. Selling ISO shares in the same tax year you exercise eliminates the AMT preference entirely (a disqualifying disposition). For SALT, AMT already disallows it entirely, so itemizing primarily makes sense for mortgage interest, charitable gifts, or other deductions that are allowed under AMT. Charitable contributions of appreciated stock deliver a deduction without triggering capital gains for AMT purposes. Deferring income to a lower-income year or accelerating AMT-preference income into a year when the AMT credit can offset it are also common approaches.