Although the US tax system has included various versions of a minimum tax since 1969, the Alternative Minimum Tax regime resembling the current system was enacted with the Revenue Act of 1978. The AMT is a parallel tax system designed to reduce the number of taxpayers who pay little or no tax due to deductions and exemptions.

Many deductions available for regular federal personal income tax liability calculations are reduced or eliminated in the AMT system, including the deduction for state and local taxes. Certain income items such as exercise of stock options are treated differently for AMT calculation purposes. After required AMT adjustments, and application of a 26% to 28% tax rate, the taxpayer’s liability is the larger of the result of the regular tax calculation and the result of the AMT calculation.

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