Final answer:
The starting point for calculating the alternative minimum tax (AMT) is the alternative minimum taxable income (AMTI). AMTI is arrived at by adding certain adjustments back to the adjusted gross income and then subtracting the AMT exemption amount.
Step-by-step explanation:
The starting point for determining the alternative minimum tax (AMT) is alternative minimum taxable income (AMTI). To calculate AMTI, you begin with your adjusted gross income and then add back in various adjustments and tax preference items that are specified by the AMT rules. Once you have determined your AMTI, you then subtract the AMT exemption amount to find the amount that is subject to the AMT rates.
The regular tax system also calculates tax based on your taxable income, which is your adjusted gross income minus deductions and exemptions. However, due to the nature of AMT, certain deductions and exemptions that are allowed under the regular tax system may be disallowed or adjusted for AMT purposes.