Do I Have to Pay Alternative Minimum Tax?

women pointing at laptop looking over taxes

If you’ve been reading any of our blog posts, you know that taxes are complicated, and there are no simple answers (but hopefully our blog posts have helped!). Alternative minimum tax (AMT) happens to be one of the more complicated tax concepts, but the good news is, it is reserved for high-income earners. So, while it is unlikely that you will have to pay alternative minimum tax, it is a possibility if your taxable income is high.

What Is Alternative Minimum Tax For?

Essentially, AMT is for those high-income earners who can take advantage of certain deductions and credits that greatly reduce their tax liability. By adding back some of those deductions and credits into their taxable income, they have an alternative minimum taxable income (AMTI). It ensures that the wealthiest people are paying a minimum tax.

How Do I know if I Need to Pay AMT?

If you think you may need to pay AMT, you’ll need to calculate your AMTI. To do this, you can use IRS Tax Form 6251 or consult a tax preparer. If your AMTI exceeds the AMT exemption amounts, you will need to pay the alternative minimum tax rate. Those exemptions for 2023 are:

  1. Single/Head of Household $81,300
  2. Married Filing Jointly: $126,500
  3. Married Filing Separately: $63, 250

AMT Tax Rates

There are only two AMT tax rates: 26% and 28%. If you find you have to pay AMT, your AMTI will determine the tax rate.

AMT, AMTI . . . I’m Still Confused!

Yes, it’s confusing. If you think you may be subject to the alternative minimum tax, it’s best to reach out to a tax preparer.

We’re here to help! Contact one of our tax preparers today.

**Please keep in mind: Tax laws, eligibility requirements and rates change often, and these lists are not exhaustive. Always contact a tax preparer for the most up-to-date information.