The alternative minimum tax (AMT) is a supplemental income tax imposed by the United States federal government required in addition to baseline income tax for certain individuals, corporations, estates, and trusts that have exemptions or special circumstances allowing for lower payments of standard income tax. AMT is imposed at a nearly flat rate on an adjusted amount of taxable income above a certain threshold (also known as exemption). This exemption is substantially higher than the exemption from regular income tax.
Regular taxable income is adjusted for certain items computed differently for AMT, such as depreciation and medical expenses. No deduction is allowed for state taxes or miscellaneous itemized deductions in computing AMT income. Taxpayers with incomes above the exemption whose regular Federal income tax is below the amount of AMT must pay the higher AMT amount.
A predecessor "minimum tax", enacted in 1969, imposed an additional tax on certain tax benefits for certain taxpayers. The present AMT was enacted in 1982 and limits tax benefits from a variety of deductions.
The AMT was originally designed to tax high-income taxpayers who used the regular tax system to pay little or no tax. Over the years, however, inflation has caused it to apply to middle-income taxpayers. Congress sporadically raises the AMT's income thresholds to give relief to these taxpayers. The American Taxpayer Relief Act of 2012 indexes these thresholds each year for inflation. Nevertheless, the number of taxpayers subject to it has increased from 200,000 in 1982 to 5.2 million in 2017.The Tax Cuts and Jobs Act of 2017 raised personal AMT exemption levels and exemption phase-out levels, but eliminated several itemized deductions. The TCJA also indexed the AMT exemptions for inflation in years after 2018. The changes are projected to reduce the number of taxpayers affected by AMT in 2018 and beyond back to the 200,000 who were subject to AMT in 1982.The TCJA was "scored" to ensure that its cost in lower government revenue was small enough to qualify under the Senate's reconciliation procedure. To improve the scoring, changes to the personal income tax, including to the AMT, expire at the end of 2025.
The TCJA repealed the Alternative Minimum Tax on corporations entirely.