You start with your regular taxable income plus or minus AMT adjustments plus tax preferences Thats your AMTI before AMT NOL deduction minus AMT NOL deduction (limited to 90%) Thats your alternative minimum taxable income minus exemption Thats your AMT base times your tax rate 26% up to $175,000, 28% over Thats your Tentative AMT before the AMT foreign tax credit minus the AMT foreign tax credit (possibly limited to 90%) Thats your Tentative Minimum Tax minus your regular income tax liability before credits minus regular foreign tax credit Thats your Alternative Minimum Tax, if the number is positive.
Remember allowable deductions are different for AMT, no misc or 2% of base deductions, 10% base on medical not 7.5% of AGI, no standard deduction or personal exemptions (there is an AMT exemption of $24,500 to $49,000 depending on your filing status. This gets phased out starting $75,000 to $150,000 depending on filing status at a rate of $1 for $4 of AMTI.
Don't worry, rich people don't spend a New York minute on this stuff, they pay tax accountants to do that. Like Dubya says, taxing the rich won't work, they have accountants to get them out of it and he should know.
Seriously, AMT is going to bite a lot of just plain folks in the butt over the next couple of years simply due to bracket inflation, in the neighborhood of 35 million taxpayers, and people are going to scream bloody murder about it. That will get Congress off the dime and tweak it back up to the higher income levels.