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Alternative Minimum Tax: Definition, How AMT Works in 2025 and 2026
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do not influence our editors’ opinions or ratingsAlternative Minimum Tax: Definition, How AMT Works in 2025 and 2026
The AMT system is meant to ensure certain high-income taxpayers pay at least a minimum amount of income tax.
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Editor & Content Strategist
23 years of experience Expertise Taxes Small business Social Security and estate planning Home services RIATina Orem is an editor and content strategist at NerdWallet. Prior to becoming an editor and content strategist, she covered small business and taxes at NerdWallet. She has a degree in finance, as well as a master's degree in journalism and an MBA. Previously, she was a financial analyst and director of finance at public and private companies. Tina's work has appeared in a variety of local and national media outlets.
Tina Orem is an editor and content strategist at NerdWallet. Prior to becoming an editor and content strategist, she covered small business and taxes at NerdWallet. She has a degree in finance, as well as a master's degree in journalism and an MBA. Previously, she was a financial analyst and director of finance at public and private companies. Tina's work has appeared in a variety of local and national media outlets. Published in Editor & Content Strategist + more + more
Head of Content, New Verticals
11 years of experienceChris Hutchison helped build NerdWallet's editorial operation and has directed coverage across banking, investing, taxes and insurance. He now leads a team exploring new verticals. Before joining NerdWallet, he was an editor and programmer at ESPN and an editor at the San Jose Mercury News.
Chris Hutchison helped build NerdWallet's editorial operation and has directed coverage across banking, investing, taxes and insurance. He now leads a team exploring new verticals. Before joining NerdWallet, he was an editor and programmer at ESPN and an editor at the San Jose Mercury News. Head of Content, New Verticals + more + moreWhat is alternative minimum tax?
What is alternative minimum tax?Alternative minimum tax (AMT) is a tax system that runs parallel to the standard tax system but has different tax rates. AMT payers, who generally have relatively high incomes, essentially calculate their income tax twice — under regular tax rules and under AMT rules — and then pay the higher amount owed.
Alternative minimum tax (AMT) is a tax system that runs parallel to the standard tax system but has different tax rates. AMT payers, who generally have relatively high incomes, essentially calculate their income tax twice — under regular tax rules and under AMT rules — and then pay the higher amount owed.AMT calculations limit certain breaks for some taxpayers so that their tax bill is higher.
AMT calculations limit certain breaks for some taxpayers so that their tax bill is higher. AdvertisementGet matched to a financial advisor for free with NerdWallet Advisors Match.
How does the AMT tax work?
How does the AMT tax work?Incomes above the annual AMT exemption amounts typically trigger the alternative minimum tax, and calculating AMT is different from calculating your tax under regular IRS rules.
Incomes above the annual AMT exemption amounts typically trigger the alternative minimum tax, and calculating AMT is different from calculating your tax under regular IRS rules.Certain types of income and tax deductions that you may exclude or deduct when figuring your normal taxes may need to be added back into your taxable income under AMT rules. For example, AMT calculations require you to include income from incentive stock options that were exercised and any refunds you received for state and local income taxes.
Certain types of income and tax deductions that you may exclude or deduct when figuring your normal taxes may need to be added back into your taxable income under AMT rules. For example, AMT calculations require you to include income from incentive stock options that were exercised and any refunds you received for state and local income taxes.See the instructions for Form 6251 for more details
See the instructions for Form 6251 for more details Internal Revenue Service. About Form 6251. Accessed Oct 9, 2025. .Alternative minimum tax rates for 2025
Alternative minimum tax rates for 2025Taxpayers who have incomes that exceed the AMT exemptions below may be subject to the alternative minimum tax when they file their 2026 tax return. AMT tax rates are 26% or 28%.
Taxpayers who have incomes that exceed the AMT exemptions below may be subject to the alternative minimum tax when they file their 2026 tax return. AMT tax rates are 26% or 28%.2025 AMT exclusions and phase-outs
2025 AMT exclusions and phase-outsSingle
Single
Single SingleMarried, filing jointly
Married, filing jointly
Married, filing jointly Married, filing jointlyMarried, filing separately
Married, filing separately
Married, filing separately Married, filing separatelyExemption amount
Exemption amount Exemption amount$88,100
$88,100$137,000
$137,000$68,500
$68,500Income at which exemption begins to phase out
Income at which exemption begins to phase out Income at which exemption begins to phase out$626,350
$626,350$1,252,700
$1,252,700$626,350
$626,350The AMT exemption amount for certain individuals under 24 equals their earned income plus $8,800.
The AMT exemption amount for certain individuals under 24 equals their earned income plus $8,800.Alternative minimum tax rates for 2026
Alternative minimum tax rates for 2026Taxpayers who have incomes that exceed the AMT exemptions below may be subject to the alternative minimum tax when they file their 2027 tax return. AMT tax rates are 26% or 28%.
Taxpayers who have incomes that exceed the AMT exemptions below may be subject to the alternative minimum tax when they file their 2027 tax return. AMT tax rates are 26% or 28%.2026 AMT exclusions and phase-outs
2026 AMT exclusions and phase-outsSingle
Single
Single SingleMarried, filing jointly
Married, filing jointly
Married, filing jointly Married, filing jointlyMarried, filing separately
Married, filing separately
Married, filing separately Married, filing separatelyExemption amount
Exemption amount Exemption amount$90,100
$90,100$140,200
$140,200$70,100
$70,100Income at which exemption begins to phase out
Income at which exemption begins to phase out Income at which exemption begins to phase out$500,000
$500,000$1,000,000
$1,000,000$500,000
$500,000The AMT exemption amount for certain individuals under 24 equals their earned income plus $9,750.
The AMT exemption amount for certain individuals under 24 equals their earned income plus $9,750.How to calculate alternative minimum tax
How to calculate alternative minimum taxThis is generally how the AMT calculation works:
This is generally how the AMT calculation works:1. Calculate your taxable income, but with fewer tax exclusions and tax deductions, as dictated by the AMT rules (IRS Form 6251 has the details on which tax breaks get eliminated in the AMT calculations.)
1. 1. Calculate your taxable income , but with fewer tax exclusions and tax deductions, as dictated by the AMT rules (IRS Form 6251 has the details on which tax breaks get eliminated in the AMT calculations.)2. Once you have that AMT version of your taxable income, subtract the AMT exemption amount.
2. 2. Once you have that AMT version of your taxable income, subtract the AMT exemption amount.3. Multiply what’s left by the appropriate AMT tax rates. The AMT has two tax rates: 26% and 28%. (Compare these with the seven federal income tax brackets, ranging from 10% to 37%.) Which rate you pay depends on how high your AMT taxable income is.
3. 3. Multiply what’s left by the appropriate AMT tax rates. The AMT has two tax rates: 26% and 28%. (Compare these with the seven federal income tax brackets , ranging from 10% to 37%.) Which rate you pay depends on how high your AMT taxable income is.4. Subtract the AMT foreign tax credit, if you qualify for it. What’s left is your income tax under the AMT rules.
4. 4. Subtract the AMT foreign tax credit, if you qualify for it. What’s left is your income tax under the AMT rules.5. If your income tax under the AMT rules is higher than your income tax under the regular rules, you pay the higher amount. This basically determines who has to pay alternative minimum tax.
5. 5. If your income tax under the AMT rules is higher than your income tax under the regular rules, you pay the higher amount. This basically determines who has to pay alternative minimum tax.The more you earn, the more complex your taxes become. Learn the 10 traps to dodge.
GET THE FREE GUIDEon NerdWallet Wealth Partners' site. For informational purposes only. NerdWallet Wealth Partners does not provide tax or legal advice.
on NerdWallet Wealth Partners' site. For informational purposes only. NerdWallet Wealth Partners does not provide tax or legal advice.What tax breaks do you lose under the AMT?
What tax breaks do you lose under the AMT?Taxpayers typically look for deductions, credits and other ways to reduce their taxable income. Under the AMT, you may not be able to take as many of these breaks.
Taxpayers typically look for deductions, credits and other ways to reduce their taxable income. Under the AMT, you may not be able to take as many of these breaks.Deductions for state and local taxes (such as property taxes) are targets, for example. A range of business items is also curtailed.
Deductions for state and local taxes (such as property taxes ) are targets, for example. A range of business items is also curtailed.Investors also could face AMT. Long-term capital gains and certain dividends could push your income up into the AMT system.
Investors also could face AMT. Long-term capital gains and certain dividends could push your income up into the AMT system.» MORE: See our picks for the best wealth advisors
» MORE: » MORE: See our picks for the best wealth advisorsDo I have to pay alternative minimum tax?
Do I have to pay alternative minimum tax?There isn’t much you can do to avoid paying AMT if you find out you have to pay it when filing your return. But figuring out whether you are vulnerable to the AMT and what triggers it can help you plan ahead. Lowering your adjusted gross income by maxing out contributions to a 401(k), an IRA or a health savings account can help, for example, as can keeping an eye on the size of your long-term capital gains.
There isn’t much you can do to avoid paying AMT if you find out you have to pay it when filing your return. But figuring out whether you are vulnerable to the AMT and what triggers it can help you plan ahead. Lowering your adjusted gross income by maxing out contributions to a 401(k), an IRA or a health savings account can help, for example, as can keeping an eye on the size of your long-term capital gains.If you suspect that you might owe AMT, consult a tax expert, such as a CPA, to help you with the additional paperwork and reduce or avoid the tax. Most good tax software will also do both sets of calculations automatically. As you enter your information, the program will run the numbers in the background according to both the regular tax system (using Form 1040) and AMT rules (using Form 6251).
If you suspect that you might owe AMT, consult a tax expert, such as a CPA , to help you with the additional paperwork and reduce or avoid the tax. Most good tax software will also do both sets of calculations automatically. As you enter your information, the program will run the numbers in the background according to both the regular tax system (using Form 1040) and AMT rules (using Form 6251).Helpful resources
Helpful resources Best Financial Advisors How to Find a Financial Advisor Near You How to Choose a Financial Advisor in 5 Steps 3 Best Wealth Management Services More like this Investment Basics Taxes Investing How Much Does a Financial Advisor Cost? Most financial advisors charge based on how much money they manage for you. Fees are typically 1% a year but can be lower. 2 By Andrea Coombes, Taryn Phaneuf Do You Need a Financial Advisor? 7 Ways to Tell You may need a financial advisor if you're facing big life changes, don't have financial goals, have complex compensation, high tax bills or for other reasons. Taryn Phaneuf How to Find Cheap or Free Financial Advice Quality financial advice is more accessible than ever — and much of it is free or inexpensive. Here's how to get it. Anna-Louise Jackson 3 Steps to Prepare for Your First Financial Advisor Meeting Here's what think about and bring to your first meeting with a financial advisor. June Sham