Alternative minimum tax for the year is the excess of tentative minimum tax over regular tax liability.
 
Tentative minimum tax is based upon a recalculated regular taxable income -- alternative minimum taxable income (AMTI) -- that is, regular taxable income computed without regard to specific adjustments and tax preference items (TPIs) that are used to reduce regular tax liability. 

For noncorporate taxpayers, the tentative minimum tax is 26 percent of the first $175,000 of AMTI in excess of the applicable exemption plus 28 percent of any additional AMTI. (For married taxpayers filing separately, the $175,000 benchmark figure is reduced to $87,500.) The tentative minimum tax of a noncorporate taxpayer then can be reduced by the alternative minimum tax foreign tax credit. 

For corporate taxpayers, the tentative minimum tax for the tax year is 20 percent of the excess of AMTI over the $40,000 AMTI exemption amount, reduced by the alternative minimum tax foreign tax credit. 

Maximum Rate of Tax on Net Capital Gains of Noncorporate Taxpayers. A limit is placed on a taxpayer’s tentative minimum so that a reduction of the capital gains rate following the enactment of the Taxpayer Relief Act of 1997 will not cause the taxpayer to be liable for AMT.
 
Exemption Amounts. The applicable exemption amounts for calculating AMT are based on a taxpayer’s filing status. They are reduced by 25 percent of a taxpayer's AMTI in excess of specified thresholds. For married taxpayers filing jointly and surviving spouses, the AMT exemption is $45,000, and the AMTI phaseout threshold is $150,000. For example, for those taxpayers the exemption amount is $45,000, less 25 percent of AMTI in excess of $150,000. When AMTI reaches $330,000, the exemption is zero. For single taxpayers and heads of households, the AMT exemption is $33,750 and the AMTI phaseout threshold, $112,500. When AMTI is $247,500 or more, the exemption is zero. 

For married individuals filing separately and estates and trusts, the AMT exemption is $22,500 reduced by 25 percent of the excess of AMTI over $75,000. It is phased out at $165,000.
 
For corporations, the exemption amount is $40,000.

In all cases, the exemption amount can never be less than zero.
Exemptions for Minor Children. For children age 13 or younger who are subject to the “kiddie tax,” the AMTI exemption is limited to the child's earned income plus $5,000 (for 1998 and annually adjusted for inflation thereafter.) (Section 59(j)) 

Exemption for Small Corporations. For tax years beginning in 1998, a corporation meeting the $5 million gross receipts test of section 448(c) is exempt from the corporate AMT. Once qualifying, to continue to be exempt, the corporation must satisfy the section 448(c) gross receipt’s test for each following year, substituting $7.5 million for $5 million. (Section 55(e)) 
A corporation losing small corporation status after once qualifying will be again subject to AMT. 

Corporations that qualify for the exemption and that have unused minimum tax credits that would otherwise offset regular tax in excess of tentative minimum tax will be able to use the minimum tax credits for up to 75 percent of regular tax.