What is the Alternative Minimum Tax?
The alternative minimum tax (AMT) is a parallel federal tax calculation. Instead of relying only on the regular income-tax system, you calculate a second result using AMT rules that modify or add back certain deductions and preference items. If the tentative minimum tax is higher than your regular tax after the applicable comparison, the difference can become additional AMT.
Think of AMT as a second lens. The regular tax calculation asks, “What tax is produced under the normal rules?” The AMT calculation asks, “What happens if certain tax preferences are limited or added back?” The two paths are then compared.
AMTI, exemption, phaseout and tentative minimum tax
AMTI
Alternative minimum taxable income is the regular tax base after AMT-specific adjustments. For this calculator, AMTI is regular taxable income plus the three adjustment fields you enter.
AMT exemption
The exemption shields part of AMTI before the AMT rates are applied. The amount depends on filing status and can be reduced by the phaseout rules.
Phaseout
Once AMTI crosses the applicable threshold, the exemption is reduced. For 2026, the simplified phaseout calculation reduces the exemption by 25 cents for each dollar above the threshold.
Tentative minimum tax
This is the AMT-side tax before the final comparison with regular tax. The 26% and 28% rates apply to the modeled taxable excess.
Why incentive stock options can create AMT exposure
One of the most important practical AMT situations occurs with incentive stock options (ISOs). When an ISO is exercised, the difference between the fair market value of the shares and the exercise price can be an AMT adjustment even when that spread is not treated as ordinary income for regular tax at exercise.
Exercise price vs. fair market value
Suppose you exercise 5,000 ISOs at a $4 strike price when the shares are worth $14.
The adjustment can increase AMTI even though you have not sold the shares.
Paper gain can create a tax bill
The shares may still be sitting in your account. The AMT calculation can nevertheless treat the ISO spread as a preference item for the AMT system.
That is why an ISO exercise can require tax planning before the shares are sold.
Alternative Minimum Tax formulas
These equations describe the simplified educational model used by this calculator. The official Form 6251 can include additional worksheets and special rules, especially for capital gains, foreign tax credits, preference items and other circumstances.
- AMTI
- alternative minimum taxable income after the modeled AMT adjustments
- E
- AMT exemption before phaseout
- P
- phaseout threshold for the selected filing status and year
The breakpoint matters. For 2026, the 26% AMT rate applies through $244,500 of taxable excess for most taxpayers and through $122,250 for married taxpayers filing separately. Amounts above that breakpoint are taxed at 28% in this model.
AMT calculation examples
The examples below isolate the moving parts. They are deliberately simple so you can see the mechanics before adding real-world complications.
$250,000 taxable income + $20,000 SALT adjustment
Assume 2026, no ISO spread and $45,000 of regular federal tax.
Compare that with the $45,000 regular tax to see the modeled AMT difference.
$180,000 regular taxable income + $60,000 ISO spread
Assume 2026 single filing and no other AMT adjustments.
The ISO spread is doing the work here: it raises the AMT-side income even though the regular taxable-income input is unchanged.
$500,000 AMTI before exemption
For 2026, the joint-filer exemption is $140,200 and its phaseout starts at $1,000,000.
The exemption is much larger for joint filers, so the same AMTI can produce a different tentative minimum tax.
$550,000 AMTI for a single filer
For 2026, the phaseout threshold is $500,000.
Once the phaseout begins, higher AMTI reduces the amount of income protected by the exemption.
AMT sensitivity: income, ISO spread and regular tax
AMT is not driven by one number. The most useful way to study a scenario is to vary one assumption at a time. The live comparison below updates with your calculator inputs.
| Variable | What changes | Typical effect |
|---|---|---|
| Regular taxable income | Raises AMTI directly | Can increase tentative minimum tax and may start the exemption phaseout. |
| SALT adjustment | Adds back a deduction | Can increase AMTI when the deduction is treated differently for AMT. |
| ISO bargain element | Adds the exercise spread | Can create AMT exposure before shares are sold. |
| Regular tax liability | Changes the comparison | A higher regular tax can reduce or eliminate additional AMT. |
How to interpret an AMT result responsibly
AMT is a comparison, not a separate tax bill by itself
The key question is whether the AMT-side calculation produces a higher liability than the regular system. A large tentative minimum tax does not automatically mean an equal additional payment.
ISO exercises deserve special attention
If an ISO exercise creates a large bargain element, the tax exposure can arrive before you sell the shares. That creates a cash-flow planning issue as well as a tax calculation.
High income can shrink the exemption
Once AMTI crosses the phaseout threshold, the exemption begins to disappear. This can make the marginal effect of additional AMTI larger than a simple 26% calculation suggests.
Use the calculator as a screening tool
Real Form 6251 calculations can involve qualified dividends, capital gains, foreign tax credits, depreciation differences, passive activity items and other adjustments. Use this page to understand the structure, not as a substitute for a filed return.
Alternative Minimum Tax calculator FAQ
AMT is a parallel federal tax calculation that limits the effect of certain deductions, exclusions and preference items. You calculate the regular tax system and the AMT system, then compare the resulting liabilities.
AMTI stands for alternative minimum taxable income. In this calculator it starts with regular taxable income and adds the AMT adjustments you enter, such as a SALT adjustment and ISO bargain element.
For 2026, the exemption is $90,100 for unmarried individuals, $140,200 for joint returns or qualifying surviving spouses, and $70,100 for married individuals filing separately. The exemption is subject to phaseout at higher AMTI.
For 2026, the 26% rate applies to the first $244,500 of taxable excess for most taxpayers and the first $122,250 for married taxpayers filing separately. The excess above those amounts is generally taxed at 28% in the simplified model.
Yes. The bargain element—the difference between the fair market value and exercise price—can be an AMT adjustment when an incentive stock option is exercised.
No. The tentative minimum tax is compared with the regular tax calculation. Additional AMT is generally the excess of the tentative minimum tax over the regular tax, subject to the rules and credits that apply to the return.
No. It is an educational model. It does not fully reproduce every preference item, capital-gain worksheet, credit limitation or special Form 6251 rule.