2016 Alternative Minimum Tax (AMT) Threshold and Exemption Amounts


[Updated for 2015-2016 Tax Year] Following enactment of the American Tax Relief Act (ATRA), the AMT patch legislation that Congress had to pass every year to ensure more people were not snagged by the Alternative Minimum tax is now no longer required. Instead the AMT exemption and associated thresholds based on filing status are now tied (or indexed) to inflation (CPI) and updated by the IRS every year. The latest AMT thresholds are shown in the tables below, which reflect marginal year over year increases

AMT Exemption and Income Threshold Details

Filing StatusAMT Exemption AmountExcess Taxable Income Rate of 28% (AMTI)AMT Phase-out Income Level
2016 AMT Thresholds and Exemptions by Filing Status
Joint Returns or Surviving Spouses$83,800$186,300$159,700
Married Individuals Filing Separate Returns$41,900$93,150$79,450
Estates and Trusts$24,100$186,300$79,450
2015 AMT Thresholds and Exemptions by Filing Status
Joint Returns or Surviving Spouses$83,400$185,400$158,900
Married Individuals Filing Separate Returns$41,700$92,700$79,450
Estates and Trusts$23,800$185,400$79,450

The AMT is complex, but it basically has two tax rates and inflation adjusted income thresholds used to figure out one’s AMT liability. See the original update below for details and examples on how the AMT works.

I will publish projected 2017 AMT figures when available and encourage you subscribe (free) via RSS or Email (you will receive a validation email to confirm your subscription) to get the latest updates. If the information here was useful please consider liking this page via the Facebook and other social media icons above and below this article.

2014 AMT Exemption and Income Thresholds

2014 Filing StatusAMT Exemption AmountExcess Taxable Income (AMTI)AMT Phase-out Income Level
Joint Returns or Surviving Spouses$82,100$182,500$156,500
Married Individuals Filing Separate Returns$41,050$91,250$78,250
Estates and Trusts$23,500$182,500$78,250

[Updated with 2012-2013 limits and fiscal cliff deal AMT fix] As part of the fiscal deal Congress has finally put in place a permanent fix to the Alternative Minimum tax (AMT) that will help prevent millions of tax payers paying the higher AMT tax rate. Legislation that makes up the fiscal cliff deal permanently adjusts AMT income exemption levels to rise with inflation, while giving lower-income taxpayers more access to credits like the child tax credit. Indexing the AMT provides tax payers with certainty on their tax rates and liability rather than waiting for Congress to enact an AMT patch each year.

In 2012 the AMT exemption level is $50,600 (singles) and $78,750 (married). For 2013 the AMT exemption level is $51,900 for singles and $80,800 for married couples filing jointly.

2012 - 2013 AMT Income Exemption Limit

For 2013, the AMT imposes a 26 percent tax rate on the first $179,500 (vs $175,000 in 2012) of income above the exemption levels shown above and 28 percent on incomes above that amount.  The AMT exemption phases out at a 25 percent rate for AMT taxable income above  $115,400 (singles) and 153,900 (married couples). In 2012, the phase out levels began at $112,500/$150,000 (single/married). The phase-out creates effective AMT tax rates of 32.5 percent (125% of 26 percent) and 35 percent (125% of 28 percent) for affected taxpayers.

How the AMT works

Everybody should pay their fair share of taxes, right? It would be difficult to find somebody who doesn’t believe that but in reality it’s not that simple. The tax code is a complicated document which gives rise to a number of loopholes that are widely known (and used) by the nation’s wealthy as well as corporations in the United States.

In contrast, if you’re a low or middle income earner, it’s much more difficult to reduce your tax burden. Of course most people don’t like taxes but they understand why they have to pay them which is what sparks a little bit of outrage when they learn of some of the nation’s rich getting some big tax breaks.

Not all of the nation’s rich have a problem with paying their fair share, though. Noted investor and one of the world’s richest men, Warren Buffet, believes that not only should the nations rich pay their fair share and more, he offered to prepay some of his tax burden to the government totaling nearly $3 billion!

For the rest of the nation’s rich who aren’t as forthcoming with their money as Mr. Buffett, the tax code includes a vaguely understood tax called the alternative minimum tax, or AMT which tries to ensure that the “rich” are taxed appropriately.

What is it?

For the nation’s rich who can write off a lot of their income, the alternative minimum tax assures that regardless of their deductions, they will always pay a minimum amount. Think of it as an alternative set of tax rules that go in to effect for those people who qualify for special tax benefits. It was originally designed to affect just 155 Americans. Now, it may potentially affect tens of millions.

There’s a reason it has made the news for the past few years and it has nothing to do with the small percentage of the population that qualifies as the nation’s rich. The AMT is now affecting more and more middle income earners, despite Congress making multiple increases to the exemption amounts.

Why the Middle Class?

For those of you with a few years under your belt, think back to what was considered filthy rich in 1969. You would probably agree that “rich” was a lot less than what it is today. The reason that the AMT is now affecting middle class Americans is because the IRS has never adjusted the AMT tax for inflation (until the fiscal cliff fix discussed above). According to the IRS, what was rich in 1969 is the same amount as it is today.

How many will be affected? According to one study, 31 million Americans will be affected this year and if you make between $75,000 and $100,000, you might be one of those who have to pay over and above your normal tax rate.

How much is the hit?

If your income is above the AMT exemption levels (see table below), there are a different set of rules and rates for figuring your taxes. E.g. The AMT tax rates start at 26% and cap out at 28%. In contrast, regular tax rates start at 10% and cap out at 35%. Secondly, a host of tax benefits and deductions (like state taxes) that are available under the normal tax rules are not available if you fall under AMT rules. In other words, far less deductions and a higher effective tax rate!

2012 - 2013 AMT Income Exemption Limit

The AMT exemptions are phased out by 25% of the excess of alternative minimum taxable income (AMTI) over $150,000 for married persons filing a joint return and surviving spouses, $112,500 for singles. Estates and trusts also face AMT and their exemption level remains unchanged at $22,500.

In reality the only way to really figure out if you owe the AMT is to do your taxes twice – once with the AMT rules described here and under standard (1040) IRS rules. I recommend you use some good tax software to help you or if your return is complicated, I suggest seeing an accountant.

If your tax liability under the standard tax rules is higher you don’t need to worry about the AMT tax rates. But if your taxes under the AMT rules and exemptions are higher, then you need to pay extra, making up the difference between the standard and AMT tax liability.

For a detailed breakdown and to calculate your specific AMT liability I suggest you use reputable tax software or visit the IRS website and complete their AMT tool or use the worksheet in Form 1040 or 6251.

Here are two basic examples to show how AMT works:

Let’s assume that you do your taxes and calculate your tax at $35,000. In contrast, your tax under the Alternative Minimum Tax rates is only $31,000. Since the AMT is lower than the normal tax, you are not subject to the AMT.

What if you calculate your tax under traditional tax rules to be $35,000 but under AMT rules, your tax is $39,000? You fall under the AMT rules and you have to pay the $39,000. To make it painfully simple, the government will take the highest of the two amounts.

How Can I Avoid the AMT?

The realistic truth is that it’s very difficult – unless you are happy to have an income below the exemption amount. Some people time their quarterly tax payments, only claim certain deductions, and, with the help of their tax advisors, employ other strategies but for most it’s not an easy task.

Leave a Reply

17 Comments on "2016 Alternative Minimum Tax (AMT) Threshold and Exemption Amounts"

Jeff S
Friday 10:54 am
Steps to minimize your AMT liability, including: Timing capital gains. The AMT exemption (an amount you can deduct in calculating AMT liability) phases out based on income, so realizing capital gains could cause you to lose part or all of the exemption. If it looks like you could be subject to the AMT this year, you might want to delay sales of highly appreciated assets until next year (if you don’t expect to be subject to the AMT then) or use an installment sale to spread the gains (and potential AMT liability) over multiple years. Timing deductible expenses. Try to time the payment of expenses that are deductible for regular tax purposes but not AMT purposes for years in which you don’t anticipate AMT liability. Otherwise, you’ll gain no tax benefit from those deductions. If you’re on the threshold of AMT liability this year, you might want to consider delaying… Read more »

[…] Alternative Minimum Tax (AMT) exemption amount for single filers will rise to $53,700 vs $52,800 n 2014. It will be $84,000, for […]

[…] start thinking about all the deductions and tax credits you can take. And be prepared for a higher AMT bill as […]

[…] following are 8 signs that you may owe the  Alternative Minimum Tax (AMT), or the rich-mans tax, this […]

[…] Alternative Minimum Tax (AMT) exemption amount for single filers will be $52,800 vs $51,900 in 2013. It will be $82,100, for […]

[…] Alternative Minimum Tax (AMT) exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly). The […]

[…] generally limited by the amount of the income tax you owe as well as any alternative minimum tax (AMT) you owe. Other qualification details for the credit can be found in this […]

[…] minimum tax (AMT) has also be permanently fixed to prevent it from expanding to more households and Congress having […]

[…] generally limited by the amount of the income tax you owe as well as any alternative minimum tax (AMT) you owe. Other qualification details for the credit, per the update below, are set to remain the […]

[…] Continue AMT patch. If the Alternative Minimum Tax (AMT) is not extended, could cut the growth of real consumer spending by 1.7 percentage points in 2013 […]

[…] some. The gift-tax exemption will fall to $1 million and the rate will rise to 55%. Further, the AMT patch will also have to be extended next year or millions of Americans will be liable for higher […]

[…] will be capped at 45%, the same as it is now. While there are likely to be more exemptions for the alternative minimum tax, there will be no […]

Cris Tarquinio
Tuesday 10:45 am

did congress pass/extend the AMT exclusion or is it falling back to $45,000

[…] is incurred (rather than the year you pay off the credit card balance). CAVEATS: If you are in the AMT you should consider making the final estimated tax payment of state and local income tax in the […]

[…] by allowing larger exemptions/tax credits to prevent millions more households from being subject to AMT. Given the impact and history of the AMT it is a near certainty that a new patch will be approved […]

[…] AMT. Most plans, like the Senate’s Gang of six one, would also cut the reviled $1.7 trillion alternative minimum tax. Further these plans seek to cut the income tax brackets from 6 to 3, while lowering the top […]

Tuesday 11:33 am
IRS Tax Tip 2011-47 on the AMT – Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for 2010. 1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax. 2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT. 3. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount. 4. The AMT exemption amounts are set by law for each filing status. 5. For tax… Read more »

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