Alternative Minimum Tax - Form 6251
Established by Congress in 1969, the Alternative Minimum Tax (AMT) is meant to ensure that high-income taxpayers who take full advantage of the special deductions and credits available to them pay at least a minimum amount of tax.
The AMT is imposed at a near flat tax rate. Its main purpose is to limit the tax benefits that accrue from a variety of deductions.
The AMT functions instead of and in parallel, not in addition, to the regular federal income tax. Every taxpayer must pay the AMT or regular tax, whichever is greater.
You may have to pay the Alternative Minimum Tax if your regular taxable income, plus or minus any adjustments, in addition to tax preference items but less the current exemption amount that applies to you, falls above the income threshold specified for your filing status
The exemption for the 2011 tax year stands at $48,450 for individuals and $74,450 for married couples filing jointly.
The income thresholds at which the exemption is phased out are $175,000 for taxpayers whose filing status is single or married filing jointly and $87,500 for those who are married but file separately.
It is important to understand that neither the exemption amounts nor the income thresholds at which the exemption phases out are currently indexed for inflation. As a result, an ever greater number of taxpayers have become subject to the AMT as their income has risen above the national median.
Under the alternative minimum tax there is no standard deduction or deduction for personal exemptions but most itemized deductions apply at least in part.