AMT Alternative Minimum Tax AMT

In 1969, Congress created the AMT to ensure wealthy Americans did not avoid paying their federal income tax by taking large deductions. The Alternative Minimum Tax (AMT) is designed to catch people who avoid paying taxes due to certain tax breaks.

Every year taxpayers need to consider whether they will have to pay the Alternative Minimum Tax (AMT). The IRS AMT Assistant provides a simple test for taxpayers who fill out their tax returns without using software. This will determine whether they may be subject to the AMT tax.

The AMT Assistant can be used by individuals, tax practitioners and community or public service organizations.

As a taxpayer you are subject to the AMT if the AMT exceeds your regular tax figured from tax tables and rate schedules, you pay whichever amount is more, your regular tax or the AMT.

Common influential factors:

• You took out a home mortgage or equity line of credit and used the money to do something other than buy, build or improve your home.
• You itemized deductions and claimed large deductions for taxes and/or miscellaneous deductions subject to the 2% adjusted gross income limit.
• You exercised incentive stock options and did not dispose of the stock in 2007.
• You claimed a large number of personal and dependent exemptions on your return.

The only itemized deductions allowed under the AMT are

• mortgage interest used to buy, build or improve your home
• charitable contributions
• casualty losses
• medical expenses in excess of 10% of adjusted gross income (AGI)
• miscellaneous itemized deductions not subject to the 2% of AGI floor.

Personal exemptions and itemized deductions for state and local taxes which reduce regular taxable income, aren't deductible under the AMT.