From Yahoo Finance: 2025-03-23 16:12:00

The Alternative Minimum Tax (AMT) ensures high-income earners pay a minimum amount of tax, separate from regular taxes. Introduced in 1969, it recalculates income by adding back certain deductions. AMT uses two tax rates (26% and 28%) and has exemptions that phase out at higher income levels, affecting complex financial situations.

AMT can increase taxes for high earners as exemptions phase out at specific income thresholds, reducing or eliminating them. Taxpayers must calculate AMT liability by applying tax rates to adjusted income after exemptions. Comparing AMT to regular tax liability determines additional payments for those exceeding the threshold.

AMT impacts high-income earners by removing deductions and applying different tax rates. Fewer people owe AMT now due to inflation adjustments, but it can still affect those with large deductions or stock options. If your income is high, your AMT exemption may decrease, increasing your taxes.

To lower tax liability, a financial advisor can optimize your portfolio. SmartAsset’s free tool matches you with vetted advisors in your area for a free introductory call. Use SmartAsset’s tax return calculator to estimate your next tax refund or balance.

Read more: Alternative Minimum Tax (AMT) Rules and Exclusions for 2025