26 U.S.C. § 55 — Alternative minimum tax imposed

(a) General rule: This subsection creates the alternative minimum tax (AMT). It's an extra tax, added on top of whatever other tax a taxpayer owes. The AMT equals the amount, if any, by which the "tentative minimum tax" for the year is more than the "regular tax" for the year. For an "applicable corporation" (a large corporation subject to the separate corporate minimum tax), the tax under section 59A is added to the regular tax before comparing. (b) Tentative minimum tax: This subsection explains how to calculate the tentative minimum tax, which is the key number used in subsection (a). (1) For taxpayers who are not corporations: (A) The tentative minimum tax is found in steps. Start with the "taxable excess." Multiply the first $175,000 of it by 26%. Multiply anything above $175,000 by 28%. Add those two results together. Then subtract the taxpayer's alternative minimum tax foreign tax credit for the year. That gives the tentative minimum tax. (B) "Taxable excess" means the taxpayer's "alternative minimum taxable income" (AMTI) for the year, minus the exemption amount (defined in subsection (d)). (C) A married person filing a separate return uses half of the dollar amounts in (A), half of $175,000, for figuring which tax rate applies. Marital status is determined under section 7703. (D) "Alternative minimum taxable income" means the taxpayer's regular taxable income, but recalculated: with the adjustments required by sections 56 and 58, and increased by the tax preference items described in section 57. If a taxpayer is subject to the regular tax, they're also subject to this tax. If someone's regular tax is figured using something other than "taxable income" as the base, that other amount is treated as their taxable income for this purpose. (2) For corporations: (A) For an "applicable corporation," the tentative minimum tax is: 15% of the corporation's adjusted financial statement income (figured under section 56A), minus the corporation's AMT foreign tax credit. (B) For any other corporation, the tentative minimum tax is zero, meaning ordinary corporations don't owe this tax. (3) Maximum rate on net capital gain for individuals: This is a formula that caps how much AMT applies to long-term capital gains, so gains aren't taxed at the higher 26%/28% AMT rates. It works like the regular capital-gains rate structure in section 1(h): part of the gain is taxed at 0%, part at 15%, part at 20%, and part of certain real estate gain (unrecaptured section 1250 gain) at 25%. The rest of the "taxable excess," the part that isn't capital gain, is still taxed under the regular 26%/28% AMT brackets from paragraph (1)(A). The dollar breakpoints for these rates are the same ones used in the regular tax under section 1(h). (c) Regular tax: This subsection defines "regular tax" for AMT purposes. (1) "Regular tax" means the regular tax liability for the year (as defined in section 26(b)), reduced by the foreign tax credit allowed under section 27(a). It does not include certain tax increases that come from recapturing earlier credits (under sections 45(e)(11)(C), 49(b), or 50(a), or under section 42(j) or (k)). (2) When figuring the regular tax for this purpose, the special income-averaging rule for farmers and fishermen in section 1301 does not apply. (3) Certain tax credits (described in sections 30C(d)(2) and 38(c)) are not allowed against the AMT, this is just a pointer to those other sections. (d) Exemption amount: This subsection sets the exemption amount used in subsection (b), and it changes over time. (1) For a taxpayer that isn't a corporation, the exemption amount is: $78,750 for a joint return or a surviving spouse; $50,600 for someone unmarried who isn't a surviving spouse; half of the joint-return amount for a married person filing separately; and $22,500 for an estate or trust. ("Surviving spouse" and marital status follow the same meanings used elsewhere in the tax code.) (2) The exemption amount shrinks as income rises, but never below zero. It's reduced by 25% of the amount by which AMTI exceeds: $150,000 for joint filers, $112,500 for single filers, or half of the joint-filer threshold for married-separate filers and for estates/trusts. There's an extra rule for married-separate filers: their AMTI itself gets bumped up by the smaller of (i) 25% of how far their AMTI exceeds the point where their exemption would hit zero, or (ii) their exemption amount before this rule applies. (3) Starting with tax years after 2012, all these dollar amounts are adjusted upward each year for inflation, using the standard cost-of-living formula (but based on 2011 instead of 2016), and rounded to the nearest $100. (4) Special, higher numbers apply for tax years beginning after December 31, 2017: The exemption amounts become $109,400 (instead of $78,750) for joint returns and surviving spouses, and $70,300 (instead of $50,600) for unmarried individuals. The phase-out thresholds become $1,000,000 (instead of $150,000) for joint filers, and half of that for other individual filers (instead of $112,500), except estates and trusts, which keep using the original, unmodified threshold. The phase-out rate itself doubles, from 25% to 50%. And during these years, the special farmers'/fishermen's rule in section 59(j) doesn't apply. These new numbers also get their own inflation adjustments: starting in calendar years after 2018 (or after 2026, specifically for the $1,000,000 threshold), each one is increased for inflation, using 2017 as the base year for the $109,400 and $70,300 amounts, and 2025 as the base year for the $1,000,000 amount, and rounded to the nearest $100. To avoid double-adjusting, the older inflation rule in paragraph (3) does not also apply to these substituted numbers during this period.