2023 vs. 2024 Alternative Minimum Tax (AMT) Income Exemption Phase-out Amounts

Following enactment of the American Tax Relief Act (ATRA), the annual “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 AMT thresholds for the past few years are shown in the tables below, which reflect marginal year over year increases.

The AMT parallel tax system makes high-income taxpayers calculate their tax bill twice: once using the ordinary income tax system and again using the AMT. Then, they pay the higher amount. Fortunately most online tax filing software packages do the calculations for you.

Get your biggest tax refund, guaranteed. Get started today.

Latest AMT Thresholds and Exemptions

Here are latest annual updates to the AMT exemption amounts by filing status. The updated table below shows year over year changes.

AMT Exemption and Income Threshold Details

Filing StatusAMT Exemption AmountExcess Taxable Rate (28%) Income Threshold BaseAMTI exemption phaseout range
2024 AMT Thresholds and Exemptions by Filing Status
$609,350 to $952,150
Joint Returns or Surviving Spouses
$1,218,700 to $1,751,900
Married Individuals Filing Separate Returns
$609,350 to $875,950
Estates and Trusts
$99,700 to $219,300
2023 AMT Thresholds and Exemptions by Filing Status
$578,150 to $903,350
Joint Returns or Surviving Spouses
$1,156,300 to $1,662,300
Married Individuals Filing Separate Returns
$578,150 to $831,150

Get the latest money, tax and stimulus news directly in your inbox

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.

Note that the Corporate AMT, applicable to corporations, were fully eliminated under the last tax reform bill. The higher limits for the individual AMT are also only temporary and will expire on Jan. 1, 2026, unless extended by Congress before then.

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 the AMT?

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!

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.

Subscribe via email or follow us on Facebook, Twitter or YouTube to get the latest news and updates

4 thoughts on “2023 vs. 2024 Alternative Minimum Tax (AMT) Income Exemption Phase-out Amounts”

  1. 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 state tax payments until 2017, as long as the late-payment penalty won’t exceed the tax savings from staying under the AMT threshold.

    Investing in the “right” bonds. Interest on tax-exempt bonds issued for public activities (for example, schools and roads) is exempt from the AMT. You may want to convert bonds issued for private activities (for example, sports stadiums), which generally don’t enjoy the AMT interest exemption.

    Accelerate income. Contrary to the general advice of deferring the recognition of income, if you are going to be subject to the AMT in 2016 but not in 2017 (assuming your marginal rate will be higher than 28 percent), it may be beneficial to accelerate income into 2016 (such as a year-end bonus) so it will be taxed at the lower AMT rate. You should project your income for both 2016 and 2017 to determine whether you will be subject to the AMT.

  2. 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 year 2010, Congress raised the AMT exemption amounts to the following levels:

    * $72,450 for a married couple filing a joint return and qualifying widows and widowers;
    * $47,450 for singles and heads of household;
    * $36,225 for a married person filing separately.

    6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,700 for 2010.

    Use the IRS AMT Assistant to determine whether you may be subject to the AMT. Taxpayers can find more information about the Alternative Minimum Tax and how it impacts them by accessing IRS Form 6251, Alternative Minimum Tax —Individuals, and its instructions at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).


Leave a Comment