AMT Alternative
Minimum Tax AMT
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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.
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