AMT (Alternative Minimum Tax).

In plain English

The Alternative Minimum Tax (AMT) is a parallel federal income tax that runs alongside the regular tax calculation. It starts with your regular taxable income, adds back certain deductions (state and local taxes, certain interest, large miscellaneous deductions), subtracts an exemption ($90,100 single / $140,200 married filing jointly in 2026), and applies a 26% or 28% rate. You pay the higher of regular tax or AMT. The exemption phases out at higher incomes ($500,000 single / $1,000,000 MFJ in 2026), which is when AMT actually bites.

01Why it matters

AMT became a non-issue for nearly all middle-income filers after the 2017 Tax Cuts and Jobs Act raised exemptions and the One Big Beautiful Bill Act of 2025 made those higher exemptions permanent. The category of people most likely to face AMT today is taxpayers with very large state and local tax deductions, large incentive stock option (ISO) exercises, or unusual high-deduction situations.

02The math, step by step

A married couple in California earns $400,000 in wages with $40,000 in state income tax paid. Their regular federal income tax is roughly $86,000. Under AMT calculation: starting from regular taxable income, the $40,000 SALT deduction is added back (AMT does not allow SALT), AMT income becomes roughly $340,000; subtract the $140,200 exemption, leaves $199,800 subject to 26% / 28% rates = approximately $52,000 AMT. Since regular tax ($86,000) exceeds AMT ($52,000), they pay regular tax. AMT did not trigger.

03What this is NOT

04Receipts

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