Alternative Minimum Tax (AMT)
Definition
A parallel tax system designed to ensure high-income taxpayers pay at least a minimum amount of tax. The AMT recalculates income tax after adding certain tax preference items back into adjusted gross income. For 2025, the AMT exemption is $85,700 for single filers and $133,300 for married filing jointly.
Example
If you have significant deductions from state taxes, incentive stock options, or certain bonds, the AMT calculation may result in a higher tax bill than the regular tax system.
Related Terms
Adjusted Gross Income (AGI)
Your total gross income minus specific deductions (called "adjustments to income...
Taxable Income
Your adjusted gross income minus either the standard deduction or itemized deduc...
Marginal Tax Rate
The tax rate applied to your last dollar of taxable income. The US uses a progre...