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What Is Form 6251: Alternative Minimum Tax-Individuals?
Form 6251: Alternative Minimum Tax-Individuals is an Internal Revenue Service (IRS) tax form used to determine the amount of alternative minimum tax (AMT) that a taxpayer may owe.
Some taxpayers with higher incomes can claim certain deductions that allow them to reduce their regular tax obligations. The AMT sets an upper limit on how much that deduction can be as a way of ensuring that wealthier individuals pay an adequate amount of taxes. If you are among those to whom it applies, you’ll pay the AMT instead of standard income taxes.
Key Takeaways
- Form 6251 is used to determine if taxpayers owe alternative minimum tax instead of standard income tax.
- The AMT was designed to ensure that the wealthy pay their fair share of taxes. It is a tax system parallel to the regular income tax.
- Changes to the AMT as part of the Tax Cuts and Jobs Act greatly reduced how many taxpayers are required to pay it.
- Exemption amounts for the AMT in 2024 start at $85,700 for individuals and $133,300 for married couples who file jointly, phasing out at $609,350 and $1,218,700 respectively.
- For 2025, these exemption amounts rise to $88,100 for individuals (phasing out at $626,350) and $137,000 for married couples who file jointly (phasing out at $1,252,700).
Understanding Form 6251: Alternative Minimum Tax-Individuals
Each taxpayer must evaluate whether or not they must pay AMT each year. Depending on your income level, you may not need to.
The AMT is a tax system parallel to the regular income tax. It was enacted in 1969 and was originally designed to identify and collect taxes owed by a limited number of wealthy individuals and families who were otherwise avoiding income taxes.
It does this by limiting the number of itemized deductions that can be claimed by a taxpayer. Deductions for state and local taxes are not allowed, for example. In addition, taxpayers impacted by the AMT cannot take the standard deduction.
The AMT has two rates (26% and 28%) versus the seven federal tax brackets, which range from 10% to 37%.
How to File Form 6251: Alternative Minimum Tax-Individuals
The AMT only applies to taxpayers who have certain types of income that receive favorable tax treatment, or who take certain deductions.
Form 1040: U.S. Individual Tax Return includes a worksheet that allows a taxpayer to determine whether AMT is owed, but it only provides basic computations. Form 6251 is more detailed and will give a more accurate answer. Alternatively, you can use tax software or enlist a tax pro.
Certain other tax forms also have an AMT version as well. For example, in addition to Form 1116, Foreign Tax Credit, there is also AMT Form 1116, Foreign Tax Credit. If you complete an AMT version of another form, do not attach it to your tax return unless you are instructed to do so.
The AMT requires affected taxpayers to calculate their tax bill under the ordinary income tax system and again under the AMT, paying the higher of the two amounts. After calculating your AMT, you can claim an exemption based on your filing status.
The AMT exemption is much higher than the standard exemption but phases out when you reach a certain income level. In 2024, the AMT exemption for individual filers is $85,700 (rising to $88,100 in 2025), and $133,300 for married joint filers (rising to $137,000 in 2025). In 2024 exemption begins to phase out when income reaches $578,150 for individual filers and $1,156,300 for married joint filers. In 2025, the phase-out amounts will be $626,350 (individual) and $1,252,700 (married filing jointly.)
All pages of Form 6251 are available on the IRS website.
Special Considerations
A lack of inflation adjustments caused the AMT to apply to a much larger group of taxpayers than originally intended. Congress had passed annual inflation adjustments to limit the reach of the AMT before instituting a permanent fix of indexing future exemption levels to inflation as part of the American Taxpayer Relief Act of 2012.
The AMT collected $4.7 billion in 2019, about 0.3% of individual income tax revenue but significantly less than the $36.2 billion collected in 2017. This decrease was mainly due to changes to the AMT that were part of the Tax Cuts and Jobs Act (TCJA) of 2017. Starting in 2018, for example, TCJA triggered a higher AMT exemption and the level at which the exemption begins to phase out.
What Is the Alternative Minimum Tax?
The alternative minimum tax (AMT) is a separate tax that is imposed in addition to your regular federal income tax. It applies to taxpayers who take certain deductions or have certain types of income and is designed to ensure that all taxpayers pay a fair share of taxes. The AMT is calculated using IRS Form 6251.
Who Has To Pay the AMT?
Any taxpayer whose income is above the AMT exemption rate may be subject to the alternative minimum tax when they file a tax return. The exemption thresholds in 2024 are $85,700 for single filers and $133,300 for married joint filers. In 2025, these amounts rise to $88,100 and $137,000 in 2025.
How Many People Pay the Alternative Minimum Tax?
According to the Tax Policy Center, just 0.1% of households in the United States were affected by the alternative minimum tax in 2022. This low percentage is primarily due to the effects of the Tax Cuts and Jobs Act (TCJA), passed in 2017, which shields the majority of high-income households from having to pay the AMT. If this provision of the TCJA is not renewed in 2025, the number of households that pay the AMT is estimated to rise to 4.1%.
The Bottom Line
The alternative minimum tax (AMT) is a parallel tax system that is designed to ensure that high earners pay a fair share of taxes. Taxpayers use IRS Form 6251 to determine whether they owe alternative minimum tax or standard income tax.
The IRS sets income thresholds for the AMT exemption and phase-out levels. These are adjusted each year for inflation. Other changes to the AMT include those made by the Tax Cuts and Jobs Act, which reduced how many taxpayers are required to pay it.