When does the alternative minimum tax (AMT) apply?

There is no straightforward test that you can use ahead of time to know if you may be liable to pay the alternative minimum tax (commonly referred to as the “AMT”). As a result, the only was to know, for sure, if you have any alternative minimum tax liability to is to calculate your AMT using IRS Tax Form 6251 and then compare that calculated AMT liability to your regular tax liability - if the AMT amount is less, you do not need to worry about it, but if it is higher than your regular tax liability you have to pay the higher AMT instead.

However, prior to using Form 6251, there are certain things in your tax return which may suggest that the AMT will apply in your situation. For example, for the 2006 tax year, if your adjusted gross income is anywhere around the following amounts, you may have AMT liability: $31,275 if you are married filing separately, $42,500 if you are single or head of household, and $62,550 if you are married filing jointly or a widow(er). Similarly, if you took the standard deduction or claimed several personal exemptions, you may be liable for the AMT. Other “flags” include: if you took itemized deductions for taxes, particularly medical expenses and/or miscellaneous expenses; if you had investment expenses; if you had income from the exercise of stock options; if you deducted research and experimental costs; and if you claimed a deduction for a net operating loss.