The 2017 tax reform act eliminated the corporate AMT. The Tax Cuts and Jobs Act kept the AMT for individuals, but raised the exemption and phase-out levels for the tax years between 2018 and 2025. The 2025 makes the bigger exemptions permanent, but the law also returns the exemption phaseout thresholds to the lower 2018 levels, beginning in 2026. The AMT phaseout thresholds will be $1 million for joint returns and $500,000 for other taxpayers, adjusted annually for inflation going forward. And the OBBBA doubles the rate at which the exemptions phase out to 50%. As a result, more high-income individuals may be hit with the AMT, starting in 2026.
A variety of exclusions, deductions, and credits are available to higher income individuals, which often allow them to reduce the amount of tax that they are required to pay on the income they earn. To ensure that these individuals pay at least some tax on their income, Sec. 55 imposes an alternative minimum tax (AMT), which requires many taxpayers to add back some of these deductions and credits and pay tax on this reconfigured amount.
The calculation of a person's AMT is parallel to its regular tax calculation. A person must calculate tax under both systems and determine its tentative minimum tax. Then the tentative minimum tax and the regular tax are compared. If the tentative minimum tax amount exceeds its regular tax amount, the excess is the alternative minimum tax, which s/he pays in addition to his or hers regular tax.
The Inflation Reduction Act of 2022 added back in a 15% corporate alternative minimum tax.