2013 and 2014 AMT Tax Brackets

Up to the end of 2012, there had been news articles every year saying if Congress didn’t act how many millions of taxpayers would be caught by the Alternative Minimum Tax (AMT). Every year, Congress came to the rescue with a patch, saving those millions of taxpayers from the claws of AMT.

They got tired of doing that. In January 2013, Congress passed American Taxpayer Relief Act of 2012, which permanently indexed the AMT for inflation, in addition to making most of the Bush tax cuts permanent.

When Congress did the annual patches, they only adjusted one number: the AMT exemption amount. The American Taxpayer Relief Act indexed for inflation all three numbers used in the AMT calculation:

  • the AMT exemption amount
  • the AMT exemption phaseout starting point
  • the 28% AMT rate breakpoint

The same law also (re-)introduced personal exemptions and itemized deductions phaseouts for upper-income taxpayers. As a result, now fewer taxpayers pay AMT. Those who still pay AMT pay less AMT (although not less total tax).

Those who still pay AMT also fall into an AMT exemption phaseout range that grows wider over time. Under AMT you get a big bucket of exemption in lieu of your personal exemptions and itemized deductions (except mortgage interest and charitable donations for the most part). That exemption is subject to phaseout. As you have more income, you also start losing that exemption, until you lose all of it. Between starting to lose the exemption and losing all of it, that’s your phaseout range.

When you are in the phaseout range, your marginal tax rate under AMT is 6.5-7% higher than the statutory 26% and 28% rates. Your marginal tax rate for qualified dividends and long-term capital gains is also 6.5-7% higher. Combined with the 3.8% Medicare surtax on investment income, the tax rate on qualified dividends and long-term capital gains can be as high as 30.8%, which isn’t much lower than the tax rate on income.

Here are the AMT tax brackets for different income levels for 2013 and 2014. The income numbers in the table are Alternative Minimum Taxable Income (AMTI), which for most taxpayers equal to AGI minus mortgage interest and charitable donations. QD & LTCG stands for qualified dividends and long-term capital gains. The two phaseout ranges are shaded in gray.

Single or Head of Household – 2013

AMTI Income QD & LTCG
$0 – $51,900 0% 0%/15%
$51,901 – $115,400 26% 15%
$115,401 – $208,200 32.5% 21.5%/25.3%
$208,201 – $323,000 35% 25.8%
$323,001 or more 28% 18.8%/23.8%

Single or Head of Household – 2014

AMTI Income QD & LTCG
$0 – $52,800 0% 0%/15%
$52,801 – $117,300 26% 15%
$117,301 – $211,700 32.5% 21.5%/25.3%
$211,701 – $328,500 35% 25.8%
$328,501 or more 28% 18.8%/23.8%

Married Filing Jointly – 2013

AMTI Income QD & LTCG
$0 – $80,800 0% 0%/15%
$80,801 – $153,900 26% 15%
$153,901 – $239,020 32.5% 21.5%/25.3%
$239,021 – $477,100 35% 25.8%/30.8%
$477,101 or more 28% 23.8%

Married Filing Jointly – 2014

AMTI Income QD & LTCG
$0 – $82,100 0% 0%/15%
$82,101 – $156,500 26% 15%
$156,501 – $242,980 32.5% 21.5%/25.3%
$242,981 – $484,900 35% 25.8%/30.8%
$484,901 or more 28% 23.8%

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Comments

  1. Steve says

    I’ve guessed I’ve not looked at this in detail and find it a bit confusing. We typically pay AMT. When I saw the phaseouts and such for regular tax calculations, I wasn’t too concerned because I assumed that the AMT would set the bar anyway. (I guess there is a chance we can exceed the AMT amount . . . ). But are you implying that there are AMT phaseouts as well that are essentially having a similar effect of raising the bar?

  2. Brian says

    Thanks so much for this!

    Your explanations of the AMT are the most clear I’ve read. It drove me crazy that the AMT seemed to be taking far more than the 26/28% advertised. You make it clear what AMT is actually doing. I still don’t like it, but at least I can understand it.

    An additional “Thank You TFB” for the Back Door IRA articles (with great graphics), very helpful.

  3. Ivy says

    That was quite helpful, thank you, I’ve never looked into how AMT works. A stupid question probably, but what happens in the top category – e.g. for married filing jointly at the $485,000 mark? Do they go back to the regular deductions?

    • Harry Sit says

      At the $485k mark, you lose all the exemption under AMT, but your rate is lower (28% vs 39.6% under regular tax). The race between AMT and regular tax keeps going. At some point, the regular tax will catch up, and you will no longer pay AMT.

  4. Art says

    Harry,

    Great article as usual! I can track all except the different rates for QD and LTCG in joint married phase-out range. Could you briefly explain? Thanks, Art

    • Harry Sit says

      QD and LTCG are included in the phaseout calculation. For every extra $4 in QD or LTCG, you lose $1 in AMT exemption, which bumps $1 more into the 26% or 28% zone, which makes you pay $0.26 or $0.28 more in tax. That comes out to 6.5% or 7% on that $4. If the tax rate on QD and LTCG is normally 15%, now you are paying 21.5%. If your AGI makes you qualify for the extra 3.8% Medicare surcharge, now you are paying 25.3%. In the next range, you have 15% + 7% + 3.8% = 25.8% or 20% + 7% + 3.8% = 30.8%.

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