Page 1: What Is the AMT?
The Alternative Minimum Tax (AMT) is a special tax that was created many years ago. It was made to make sure that high-income people still pay taxes, even if they have a lot of deductions. Sometimes, these deductions can make regular taxes very low. So, the AMT is like a second tax system that checks to see if someone should pay more.
Normally, people calculate their regular tax first. Then they check to see if they also need to pay the AMT. If the AMT number is higher, they pay that instead.
This tax can surprise people who earn more or who have special tax breaks. But in 2025, there’s good news: you can avoid AMT (Alternative Minimum Tax) with the restored 2018-level exemption for higher earners. That means you don’t get caught by this extra tax if you plan right.
Page 2: What Is the 2018-Level Exemption?
Back in 2018, the government changed the tax law. They made the AMT easier to avoid by raising the “exemption.” An exemption is the amount of income you can skip when calculating the AMT. If your income is under this level (after the exemption), you don’t have to pay the AMT.
The 2018 law made the exemption much bigger. It also made it harder for the exemption to disappear as income went up. This was great for higher earners because it meant fewer people had to pay the AMT.
In 2025, this 2018-level exemption is restored. That means it’s back to helping more people avoid the tax. If you’re a higher earner, you can now plan better to avoid AMT (Alternative Minimum Tax) with the restored 2018-level exemption for higher earners. This is important if you live in a state with high taxes, have many deductions, or make more money.
Let’s break down the numbers:
- In 2025, the exemption for single filers is expected to be about $81,300.
- For married couples filing jointly, it’s about $126,500.
Also, the phase-out (where the exemption starts going away) happens at a much higher income level—around $578,150 for singles and $1,156,300 for couples. This is a huge help for higher earners.
Page 3: Smart Ways to Avoid AMT in 2025
If you are a higher earner, here are a few smart ways to use the 2018 exemption and avoid the AMT:
- Watch Your Deductions
- Big deductions like state taxes, medical costs, and mortgage interest used to trigger the AMT.
- In 2025, because of the 2018-level exemption, these might not affect you as much. Still, keep track and talk to a tax pro.
- Time Your Income and Expenses
- Try to spread income and deductions across years so they don’t pile up in one year.
- If you sell stock or get a bonus, check if it pushes you into AMT territory.
- Use Tax Software or a CPA
- Taxes are tricky. Use tools or a tax advisor to test if the AMT might apply.
- Ask them how to avoid AMT (Alternative Minimum Tax) with the restored 2018-level exemption for higher earners.
- Be Careful with Incentive Stock Options
- If you get stock options from work, they can cause AMT problems if you don’t plan.
- Sell them smartly and plan ahead.
By using these steps, you can take full advantage of the tax laws and avoid AMT (Alternative Minimum Tax) with the restored 2018-level exemption for higher earners in 2025.
Final Tip:
Tax laws can change. But in 2025, the restored 2018 rules give you a chance to keep more of your money. That means more savings for you and your family. Talk to a tax expert to make sure you’re getting the full benefit.
