Financial Glossary
Alternative Minimum Taxable Income (AMTI)
Alternative Minimum Taxable Income (AMTI) is the figure used to compute a taxpayer's alternative minimum tax (AMT). It starts from regular taxable income and adds back certain deductions and tax preference items, then subtracts an exemption amount to arrive at the base the AMT rate is applied to. AMTI exists because the AMT is a parallel tax system designed to ensure that taxpayers with significant deductions still pay a minimum level of tax.
Problem & Application
AMTI most often surprises owner-operators and investors with large depreciation write-offs, incentive stock option exercises, or sizable state-tax and other preference items. A real-estate or short-term-rental owner who relies heavily on accelerated depreciation, or a startup employee exercising ISOs, can find that adjustments push AMTI well above regular taxable income and trigger AMT. Because exemption amounts and the items added back change with current IRS rules, AMTI should be projected before year-end rather than discovered at filing.
In Short
AMTI is the engine behind the alternative minimum tax, so understanding what gets added back is the key to anticipating an AMT bill. Planning around it can prevent an unexpected tax surprise.