Alternative Minimum Tax (AMT) Calculator
Determine if you owe AMT as Head of Household filer
What is AMT?
Alternative Minimum Tax (AMT) is a parallel tax system designed to ensure high earners pay minimum tax even with deductions/credits. You calculate regular tax AND AMT, then pay whichever is higher.
Who Gets Hit:
HOH filers with $150k-$500k income who have large deductions (SALT, depreciation, incentive stock options, etc.). Tax Cuts and Jobs Act (2018) reduced AMT impact, but still affects some.
AMT Exemption & Phase-Out (2025)
| Filing Status | AMT Exemption | Phase-Out Starts | Phase-Out Rate |
|---|---|---|---|
| Head of Household | $85,700 | $609,350 | 25¢ per $1 |
| Single | $85,700 | $609,350 | 25¢ per $1 |
| Married Filing Jointly | $133,300 | $1,218,700 | 25¢ per $1 |
How Exemption Works:
Exemption amount is subtracted from AMT income before applying AMT rates (26% up to $220,700, 28% above). Phase-out reduces exemption by 25¢ for every $1 over threshold.
AMT Calculation Steps
Step 1: Calculate Regular Taxable Income
Start with your regular Form 1040 taxable income
Step 2: Add Back AMT Adjustments
Add back items not allowed for AMT:
- • State/local tax deduction (full $10k back)
- • Miscellaneous itemized deductions
- • Standard deduction if you took it
- • Personal exemptions (suspended through 2025)
- • Home equity interest (if not for home improvement)
- • Accelerated depreciation difference
- • ISO exercise spread (huge AMT trigger)
Step 3: Calculate AMTI
Alternative Minimum Taxable Income = Regular income + Adjustments
Step 4: Subtract AMT Exemption
AMTI - $85,700 exemption (reduced if income over $609,350)
Step 5: Apply AMT Rates
• 26% on first $220,700
• 28% on amount over $220,700
Step 6: Compare to Regular Tax
If AMT > regular tax, pay the difference as AMT
Common AMT Triggers
1. Large SALT Deduction
High state/local taxes. If you claimed $10k SALT deduction, it's added back for AMT (no SALT deduction under AMT rules).
2. Incentive Stock Options (ISOs)
Exercise ISOs = huge AMT hit. Spread between exercise price and FMV added to AMT income (even though no cash received).
3. High Depreciation
Accelerated depreciation methods create AMT adjustment. Must use slower depreciation for AMT.
4. Private Activity Bonds
Interest from private activity municipal bonds (normally tax-free) is taxable for AMT purposes.
Example Calculations
Example 1: No AMT (Most HOH Filers)
HOH, $100k AGI, standard deduction:
Regular taxable income: $100k - $22.5k = $77,500
Regular tax: ~$11,750
AMTI: $77,500 + $22,500 (standard deduction back) = $100,000
Minus exemption: $100k - $85,700 = $14,300
AMT: $14,300 × 26% = $3,718
Regular tax ($11,750) > AMT ($3,718) → No AMT owed
Example 2: AMT Due to ISO Exercise
HOH, $200k salary, exercised ISOs with $300k spread:
Regular taxable income: $200k - $22.5k = $177,500
Regular tax: ~$37,000
AMTI: $177,500 + $22,500 (std ded) + $300k (ISO spread) = $500,000
Minus exemption: $500k - $85,700 = $414,300
AMT: ($220,700 × 26%) + ($193,600 × 28%) = $111,590
AMT ($111,590) > Regular ($37,000) → Owe $74,590 extra AMT!
Note: Get AMT credit for future years when sell stock
Example 3: AMT from High Income + SALT
HOH, $400k income, $10k SALT + $30k mortgage interest:
Regular taxable income: $400k - $40k itemized = $360,000
Regular tax: ~$92,000
AMTI: $360k + $10k (SALT back) = $370,000
Minus exemption: $370k - $85,700 = $284,300
AMT: ($220,700 × 26%) + ($63,600 × 28%) = $75,190
Regular ($92k) > AMT ($75k) → No AMT (but close)
💡 How to Avoid/Minimize AMT
1. Timing ISO Exercises
Spread exercises over multiple years to stay below AMT threshold. Don't exercise all at once.
2. Don't Exercise ISOs in December
Wait until January - gives you extra year before AMT due (ISOs taxed in year of exercise, not sale).
3. Consider Disqualifying Disposition
Sell ISO stock before 2-year/1-year holding period to convert to regular income (avoids AMT, but loses favorable cap gains treatment).
4. Accelerate Income
If already in AMT, accelerate income to same year (Roth conversion, bonus, etc.) - you're paying 26-28% AMT rate instead of potentially higher regular rate.
5. Time Deductions
If in AMT, defer deductions to next year when not in AMT (they're wasted in AMT year).
6. Avoid Private Activity Bonds
Choose regular municipal bonds over private activity bonds if concerned about AMT.
AMT Credit (Form 8801)
Good news: AMT from "deferral items" (like ISOs) generates AMT credit you can use in future years when regular tax exceeds AMT.
How It Works:
When you pay AMT on ISO exercise, you get credit equal to AMT paid. When you later sell stock and pay regular tax, you can use credit to reduce regular tax.
Example:
• 2025: Pay $70k AMT on ISO exercise → $70k AMT credit carryforward
• 2026: Sell stock, regular tax $100k, AMT $20k → Credit saves $70k → Only pay $30k
Tracking Credits:
File Form 8801 every year to track AMT credit. Credits carry forward indefinitely (no expiration). Tax software tracks automatically.
Form 6251: How to Calculate AMT
Part I: Alternative Minimum Taxable Income
Lines 1-28: Calculate AMTI by adding back adjustments to regular income
Part II: Alternative Minimum Tax
Lines 29-55: Subtract exemption, apply AMT rates, compare to regular tax
Part III: Tax Computation Using Maximum Capital Gains Rates
If you have capital gains, separate calculation to apply preferential rates
Most tax software calculates Form 6251 automatically. If doing manually, expect to spend 2-3 hours on first attempt.