How to Calculate Alternative Minimum Tax
- 1). Figure out your adjusted gross income number, which represents the amount of your income that is taxable.
- 2). Add back selected deductions and exemptions into the adjusted gross income figure. Keep in mind that these various tax benefits are reduced or eliminated in the AMT calculation.
- 3). Using the alternative minimum tax income figure, subtract out the AMT exemption, which is a lump-sum amount that determines your AMT number. Make sure to factor in the AMT phaseout because these exemptions can be reduced or eliminated if your alternative minimum taxable income exceeds a specified amount. All this can be done using Form 6251.
- 4). Now that the alternative minimum taxable income has been calculated, we need to figure the AMT liability number. To figure the actual AMT liability, the AMT tax rates must be applied. These rates vary based on the level of your alternative minimum taxable income. Be sure to check the current income levels and rates for that particular tax year. An example of this type of calculation would be if your alternative minimum taxable income is $175,000 and the AMT rate is 26%, then the tax liability figure would equal $45,500 (175,000 x 0.26).
- 5). The AMT liability figure is then compared to the regular tax liability number. Whichever number is higher is the amount you owe for your tax liability.
Source...