AMT

The Alternative Minimum Tax is a parallel tax calculation in the US designed to ensure high-income taxpayers pay a minimum amount of tax, even after claiming deductions that would otherwise significantly reduce their liability under regular tax rules. Taxpayers calculate their liability both ways, standard and AMT, and pay whichever amount is higher.

AMT uses a different set of allowable deductions than regular tax, notably disallowing the state and local tax (SALT) deduction and treating certain income, like the exercise of incentive stock options, differently. For 2026, the AMT exemption is $88,100 for single filers and $137,000 for those filing jointly, phasing out above $626,350 and $1,252,700 respectively. Most middle-income taxpayers never trigger it, but the Federal Income Tax Calculator can flag whether AMT applies to your specific situation.

Tax Owed = max(Regular Tax Liability, AMT Liability)

AMT Liability = (AMT Taxable Income − AMT Exemption) × AMT Rate (26% or 28%)

A high earner has $200,000 in taxable income under regular rules, but claims $60,000 in state and local tax deductions, which get added back under AMT calculations, bringing AMT taxable income to $260,000.

• AMT exemption (single, 2026): $88,100
• AMT taxable income after exemption: $260,000 − $88,100 = $171,900
• AMT liability (26% rate): $171,900 × 26% ≈ $44,694

If this exceeds their regular tax liability calculated under standard rules, the taxpayer owes the higher AMT amount instead, the entire point of the parallel calculation.

• Most taxpayers never trigger it, but high earners with large deductions should check. AMT specifically targets situations where regular tax deductions would otherwise dramatically reduce liability relative to income.
• SALT deduction is disallowed under AMT. This is one of the most common reasons high earners in high-tax states get pulled into AMT territory.
• Incentive stock option exercises are a frequent, often surprising trigger. The spread at exercise counts as AMT income even before shares are sold, catching some employees off guard with an unexpected tax bill.
• The exemption phases out at high income levels. Above the phase-out threshold, the AMT exemption shrinks, making AMT liability more likely as income climbs further.
• Tax software calculates both scenarios automatically. You don't need to manually determine whether AMT applies, standard filing tools run both calculations and apply whichever produces the higher liability.