Alternative Minimum Tax
How is the Alternative Minimum Tax calculated?
The calculation of alternative minimum tax begins after the Adjusted Gross Income (AGI) is computed. The AMT is basically an add on to the normal income tax computation that is done. After you are done with the calculation of AGI, some of the preferential deductions (standardized or itemized) are added back into the AGI. Next a standard, flat alternative minimum tax deduction is deducted from the total. The remaining figure is known as AMT Taxable Income (AMTI). This AMTI is further taxed at different rates, instead of the current taxation rate. The output is the Tentative Minimum Tax (TMT), and in case if it exceeds the regular income tax the TMT is paid.
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