Alternative Minimum Tax (AMT)
What is alternative minimum tax?
The tax laws gives special treatment to some types of income, allow special deductions for some
types of expenses, and allow credits for certain taxpayers. These laws enable some taxpayers with substantial
economic income to significantly reduce their regular tax.
Some common reasons for having to pay the Alternative Minimum Tax or AMT include:
having a large number of exemptions,
having a large amount of employee business expenses,
having a high state income tax deduction and
exercising incentive stock options.
What is the purpose of alternative minimum tax AMT?
The alternative minimum tax ensures that these taxpayers pay at least a minimum amount of tax on
their economic income. In other words, it is designed to prevent you from not paying your fair share of taxes due
to excessive use of certain tax breaks. The tax uses a separate method with its own unique rules. Reducing the
allowable itemized deductions and computing depreciation differently are examples.
Which to pay, regular tax or alternative minimum tax (AMT)?
If the alternative minimum tax or AMT results in a higher tax than the regular tax calculation,
you are liable for the higher amount.
Alternative minimum tax or AMT forms
The alternative minimum tax or AMT is figured by using IRS tax Form
6251, Alternative Minimum Tax- Individuals. The amount of the alternative minimum tax or AMT is
entered on line 45 of Form 1040.
You may have to pay the alternative minimum tax or AMT if your taxable inocme for regular tax
purposes combined with certain adjustments and tax preference items is more than:
||Married filing jointly or Qualifying Widow(er)
||Single or Head of Household
||Married filing separately
There is a worksheet that you can use to determine whether you should complete Form 6251.