What is the AMT exemption phaseout?

When calculating your alternative minimum tax liability, you can generally take an exemption, which lowers the amount of your AMT income and, thus, lowers your potential AMT liability. However, if your AMT income is above a certain amount, the amount of your exemption begins to phaseout (that is, the higher your income, the lower an exemption you can claim). The threshold amount that triggers this AMT exemption phaseout is $75,000 (if you are married filing separately), $112,500 (if you are single or filing as head of household) or $150,000 (if you are married filing jointly or a qualified widow or widower). If your AMT income is above this threshold amount, the amount of your AMT exemption is lowered by $0.25 for ever $1 your AMT income is over this amount. For example, if you are single and your AMT income is $115,000, that is $2,500 over the threshold amount, so your exemption would be lowered by $625.

As a result of this phaseout, at a certain point you are no longer entitled to take any AMT exemption. You lose this exemption if your AMT income is $191,000 (if you are married filing separately), $273,500 (if you are single or filing as head of household) or $328,000 (if you are married filing jointly or a qualified widow or widower).