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Quick Facts: Alternative Minimum Tax (AMT)

Visit our AMT Topics Page for more information on the AMT

The Alternative Minimum Tax parallels the regular income tax: taxpayers whose AMT liability exceeds their regular tax liability pay the difference as AMT.

The AMT replaces personal exemptions and some deductions (most notably, the standard deduction and the deduction of state and local taxes) with an AMT exemption and applies two tax rates-26% on the first $175,000 and 28% on any excess-to the resulting AMT taxable income.

Unlike the regular income tax, the AMT is not indexed for inflation. Thus, ever more taxpayers owe AMT as that liability rises relative to regular tax liability.
Testimony: The Individual Alternative Minimum Tax

2. An expiring "patch" protects taxpayers from the AMT in 2011

Around 4 million taxpayers will pay $39 billion in AMT in 2011, an average of about $9,000 each. Without temporarily higher AMT exemptions of $74,450 for married taxpayers and $48,450 for others, even more Americans would have had to pay the AMT.
Table: Aggregate AMT Projections, 2011-2022

amt exemptions

3. Lower AMT exemptions will push many more taxpayers onto the AMT for tax years after 2011

The AMT exemptions fall to $45,000 for couples and $33,750 for other taxpayers in 2012. Unless Congress raises those amounts, over 31 million taxpayers will owe AMT totaling roughly $132 billion in 2012, an average of about $4,200 per affected taxpayer.
Table: Aggregate AMT Projections, 2011-2022

AMT - Taxpayers
Underlying data: download

4.What would it cost to extend the "patch?"

A temporary extension of the 2011 AMT exemption, indexed for inflation, would cut revenues by $85 billion in calendar year 2012 and reduce the number of taxpayer by 85 percent from over 31 million to 4.6 million. Permanently extending and indexing the patch would cost $1.1 trillion through 2022 if the 2001-10 tax cut expire as scheduled
Table: Extend Patch and Index AMT for Inflation

5. The AMT will generate substantial revenues between calendar years 2011 and 2022

The AMT will account for about $1.3 trillion over the 2011-2022 calendar year period if the 2001-2010 tax cuts are not extended.

If the 2001-2010 tax cuts are extended beyond their scheduled expiration after 2011 and the AMT is left unpatched, the AMT will account for $2.7 trillion over the 2011-2022 calendar year period.
Table: Aggregate AMT Projections, 2011-2022

AMT - Revenue
Underlying data: download

6. AMT will grow rapidly because it is not indexed for inflation. Extending recent tax cuts will make matters worse.

If the 2001-2010 tax cuts are not extended beyond 2012, the percentage of taxpayers owing AMT will rise from just 5 percent in 2011 to over 20 percent in 2013.

If the 2001-2010 tax cuts are extended but the AMT patch is not, 36 percent of taxpayers will owe AMT in 2013.
Table: Number of AMT Taxpayers with and without AMT Fix

7. Who pays the AMT?

Congress intended the AMT for high-income taxpayers, but the tax is moving ever further down the income distribution

In 2011, about half of taxpayers with incomes between $200,000 and $500,000 will pay AMT while less than 4% of taxpayers with incomes between $100,000 and $200,000 and less than 1% of those with incomes below $100,000 will pay the alternative tax.

In 2012, barring congressional action, about 94% of those with incomes between $200,000 and $500,000 will pay the tax as will roughly 80% of those with income between $500,000 and $1 million and between $100,000 and $200,000.

Taxpayers at the very top of the income scale are less likely to pay AMT than those just below them because they pay the top regular tax rate, which exceeds the top AMT rate.
Table: Characteristics of AMT Taxpayers

Families with more children are more likely to owe AMT
Under current law, 44% of taxpayers with three or more children will owe AMT in 2012, compared with 17% of childless taxpayers because the regular tax system allows exemptions for dependents that the AMT does not.
Table: Characteristics of AMT Taxpayers

click for underlying data

Residents of high-tax states are more likely to pay AMT than those in low-tax states.
Over a quarter of residents of high-tax states will owe AMT in 2012, compared with one-fifth of residents of low-tax states because the AMT does not allow a deduction for state and local taxes paid.
Table: Characteristics of AMT Taxpayers

Taxpayers are much more likely to owe AMT in some states than in others.
The top five states in terms of percentage of returns on the AMT are New Jersey, New York, Connecticut, the District of Columbia, and California with rates ranging from 8.7 to 6.5% in 2008. In contrast, less than 2% of taxpayers in Alaska, Nevada, South Dakota, Tennessee, West Virginia or Wyoming paid the alternative levy.
Table: 2008 Alternative Minimum Tax by State

8. The AMT substantially reduces the value of the 2001-2010 tax cuts for many taxpayers. Roughly than one-seventh of tax reductions from the cuts will be reclaimed by the AMT in 2012.

Nearly a quarter of taxpayers with incomes between $200,000 and $500,000 will get no benefit from the tax cuts in 2012, and taxpayers in that income range will, as a group, lose 74% of the value of the tax cuts to the AMT in that year.
Table: 2012 Effect of the AMT on 2001-2010 Tax Cuts

9. Options for Repealing or Modifying the AMT

Extend the AMT Patch and index the parameters for inflation; would cost $1.1 trillion from 2012-2022
Table: Extend AMT Patch and Index Parameters for Inflation
Repeal the AMT and impose a 4% surtax on high-income taxpayers
Table: Repeal AMT and Implement 4% Surtax
Repeal the AMT and the deduction for state and local taxes
Table: Repeal State and Local Tax Deduction and AMT
Other options to repeal or modify the AMT
Research Paper: Options to Fix the AMT

10. Historical data on AMT revenues and taxpayers, 1970-2022

Table: AMT Recent History and Projections, 1970-2022

For more on the AMT visit the AMT Tax Topics page