2022 Alternative Minimum Tax (AMT) Income Threshold and Exemption Amounts (2022)

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 latest AMT thresholdsare shown in the tables below, which reflect marginal year over year increases.

Covered in this Article:

(Video) Alternative Minimum Tax Explained (AMT Rules Explained 2018) (How Alternative Minimum Tax Works)

2022 AMT Thresholds and Exemptions

The IRS has released official 2022 AMT data and here are updates to the AMT exemption amounts by filing status. The updated table below shows year over year changes.

  • Married filing jointly/surviving spouses – $118,100
  • Unmarried individuals (other than surviving spouses) – $75,900
  • Married filing separately – $59,050
  • Estates and trusts – $26,500

AMT Exemption and Income ThresholdDetails

Filing StatusAMT Exemption AmountExcess Taxable Income Rate of 28% (AMTI)AMT exemption phase out range

2022 AMT Thresholds and Exemptions by Filing Status

Single$75,900$206,100$539,900 (to $843,500)
Joint Returns or Surviving Spouses$86,200$206,100$1,079,800 (to $1,552,200)
Married Individuals Filing Separate Returns$59,050$103,050$539,900 (to $776,100)

2021 AMT Thresholds and Exemptions by Filing Status

Single$73,600199,900$523,600
Joint Returns or Surviving Spouses$86,200199,900$1,047,200
Married Individuals Filing Separate Returns$57,300$99,950$523,600

2020 AMT Thresholds and Exemptions by Filing Status

Single$72,900$197,900$518,400
Joint Returns or Surviving Spouses$84,500$197,900$1,036,800
Married Individuals Filing Separate Returns$56,700$98,950$518,400

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.

(Video) What is Alternative Minimum Tax (AMT)? | Tan Phan, MSFP, CFP®

How the AMT works

Everybody should pay their fair share of taxes, right? It would be difficult to find somebody whodoesn’tbelieve 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 whoaren’tas 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.

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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) IRSrules. 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.

(Video) Alternative Minimum Tax (AMT) Credit Examples | Tan Phan, MSFP, CFP®

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.

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(Video) AMT overview | Taxes | Finance & Capital Markets | Khan Academy

FAQs

2022 Alternative Minimum Tax (AMT) Income Threshold and Exemption Amounts? ›

“The Alternative Minimum Tax exemption amount for tax year 2022 is $75,900 and begins to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption begins to phase out at $1,079,800).”

How much is AMT exemption? ›

AMT exemptions
Type of taxpayer2017 exemption2021 TCJA exemption
Single filer$54,300$73,600
Married filing jointly or qualifying widow(er)$84,500$114,600
Married filing separately$42,250$57,300

What are the tax rates for 2022? ›

2022 Tax Brackets for Single Filers and Married Couples Filing Jointly
Tax RateTaxable Income (Single)Taxable Income (Married Filing Jointly)
10%Up to $10,275Up to $20,550
12%$10,276 to $41,775$20,551 to $83,550
22%$41,776 to $89,075$83,551 to $178,150
24%$89,076 to $170,050$178,151 to $340,100
3 more rows

What is the alternative minimum tax AMT exemption amount for married filing separately? ›

AMT exemptions

Exemption amounts for 2020 are: Married filing jointly or qualified widow(er) — $113,400. Single or head of household — $72,900. Married filing separately — $56,700.

What is threshold AMT? ›

An alternative minimum tax (AMT) places a floor on the percentage of taxes that a filer must pay to the government, no matter how many deductions or credits the filer may claim. The United States currently has an alternative minimum tax for taxpayers who earn above certain thresholds.

What is AMT exemption for 2021? ›

AMT Exemption for 2021

The alternative minimum tax (AMT) exemption for 2021 is: $114,600 for married individuals filing jointly and surviving spouses, $73,600 for single individuals and heads of households, $57,300 for married individuals filing separately, and.

What is the personal exemption for 2022? ›

The personal exemption for tax year 2022 remains at 0, as it was for 2021, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.

Are tax rates changing in 2022? ›

Although the tax rates didn't change, the income tax brackets for 2022 are slightly wider than for 2021. The difference is due to inflation during the 12-month period from September 2020 to August 2021, which is used to figure the adjustments.

What will the standard deduction be for 2022? ›

For the 2022 tax year, the standard deduction is $12,950 for single filers and married filing separately, $25,900 for joint filers and $19,400 for heads of household.

How do I calculate my AMT 2021? ›

The 2021 AMT rate of 28% applies to the excess of $199,900 for married filing jointly taxpayers. $199,900 (2021 AMT limit for 26% tax rate) X 26% = $51,974. ($312,000 - $199,900) X 28% = $31,388. $51,974 + $31,388 = $83,362.

What is the AMT exemption for 2020? ›

The AMT exemption amount for 2020 is $72,900 for singles and $113,400 for married couples filing jointly (Table 3). In 2020, the 28 percent AMT rate applies to excess AMTI of $197,900 for all taxpayers ($98,950 for married couples filing separate returns).

What is the alternative minimum tax and how does it work? ›

What is alternative minimum tax (AMT)? The alternative minimum tax, or AMT, is calculated using a different set of rules meant to ensure certain taxpayers pay at least a minimum amount of income tax. AMT calculations limit certain breaks for some taxpayers so their tax bill is higher. AMT rates are 26% or 28%.

What is the AMT exemption for 2020? ›

The AMT exemption amount for 2020 is $72,900 for singles and $113,400 for married couples filing jointly (Table 3). In 2020, the 28 percent AMT rate applies to excess AMTI of $197,900 for all taxpayers ($98,950 for married couples filing separate returns).

What is the AMT exemption for 2019? ›

The AMT exemption amount for 2019 is $71,700 for singles and $111,700 for married couples filing jointly (Table 3). In 2019, the 28 percent AMT rate applies to excess AMTI of $194,800 for all taxpayers ($97,400 for married couples filing separate returns).

How do I calculate my AMT 2021? ›

The 2021 AMT rate of 28% applies to the excess of $199,900 for married filing jointly taxpayers. $199,900 (2021 AMT limit for 26% tax rate) X 26% = $51,974. ($312,000 - $199,900) X 28% = $31,388. $51,974 + $31,388 = $83,362.

What amount triggers AMT? ›

An individual's or married couple's income above the alternative minimum tax exemption amounts is what triggers the alternative minimum tax. This typically applies to higher earners. The AMT is 26% or 28%.

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