In present law, AMT is the amount by which the tentative minimum tax exceeds the regular income tax.
Regular income tax uses takes your AGI, subtracts your standard or itemized deductions, and then subtracts your personal exemptions, to arrive at taxable income.
AMT starts with your AGI, and then adds or subtracts any adjustments allowed under AMT rules, to arrive at taxable income for AMT purposes. You then calculate your AMT tax at a 26% or 28% tax rate.
Basically, you’ll get hit with AMT if your regular income tax is less than your tentative minimum tax.
Currently, the exemption amount is $62,550 for married couples.
If the new tax bill goes through, for taxable years beginning after 2007, the new exemption amount is $66,250.
Still not the greatest thing in the world… but at least they did something.
Here’s the Bill: