Do not let the tax you catch alternative minimum by surprise.
The Alternative Minimum Tax (AMT) was created in 1969 to keep a small number of wealthy taxpayers to use tax loopholes to avoid paying any tax at all.
instead of closing gaps, Congress came up with a plan to calculate the tax in two different ways a person - once the traditional tax system and once with a special system "alternative "
the taxpayer pays the higher of the two results .. As you can imagine, this dual system can be complex and confusing.
Originally the system has not bothered a lot of people because it applied particularly to taxpayers. However, AMT amounts do not take account of inflation, and, unfortunately, quickly began to affect more and more Americans.
Here's how to know if it might affect you and what you can do about it.
1. If your income is less than $ 53,0 in 2015, you generally do not have to pay AMT.
A certain amount of revenue per year is exempt from the AMT. This is called your exemption. If your income is below the exemption, you usually do not have to worry about the AMT
For 2015, the AMT exemption amounts for each tax filing status are :.
| Single | $ 53,0 |
| Married filing jointly | $ 83,400 |
| Married filing separately | $ 41,700 |
| householder | $ 53,0 |
your income for this purpose is calculated from your adjusted gross income, with certain changes required by the AMT. It is best to use these amounts as a rule of thumb to determine if the AMT can apply to you.
2. Some common tax items do not affect the AMT.
Some items are deductible for tax on regular income, but not deductible for AMT.
For example, the standard deduction reduces your standard tax amount but not the AMT. itemized deductions for state and local income taxes, property taxes and business expenses of employees are also not deductible against the AMT.
In addition, personal exemptions are allowed in calculating your AMT. For fiscal year 2015, the personal exemption is $ 4,000 per eligible person.
If you ask for exemptions for two adults and three children, your exemptions could equal $ 20 000 (5 x $ 4,000).
However, this does not automatically mean these deductions and exemptions will not do you any good. The AMT uses its own set of tax rates, so your total AMT can still be less than the amount of tax on regular income.
Remember, you pay the amount that is the greater of the tax on regular income and AMT.
Unless you have significant deductions and other tax preference items not authorized by the AMT, you probably still only owe tax on ordinary income.
3. You may need to file Form 6251 if you have specific AMT items.
If you need to report any of the following on your tax return, you must file Form 6251, Alternative Minimum Tax , even if you do not have to AMT.
- accelerated damping
- fresh investment interest on the 4952 form
- Home mortgage interest on a loan you made not use to buy, build or improve your home.
other less common items include exclusions section 02, intangible drilling, circulation, research, experimentation, or operating costs, tax-exempt interest of private activity bonds, and so on.
If the Form 6251 is required, TaxAct fill the form according to your tax items.
4. A little planning can help you avoid the AMT.
The best way to plan ahead for the AMT is to read your tax return each year, including the Form 6251.
Your strategy depends on your income and the type of tax benefits that trigger the AMT for you. For example, if the accelerated capital cost allowances you pay AMT, you can choose another method of amortization.
Just know how the AMT can help you make better fiscal decisions. If you have itemized deductions about the amount of your standard deduction, you may be better off taking itemized deductions to avoid the AMT because the standard deduction is not allowed.
TaxAct can help you determine if itemize or take the standard deduction will result in a lower tax bill.
If you're subject to AMT in a few years, but not in others, try to time deductible expenses for the years you get the tax benefit most.
5. If you pay AMT, you can get credit later.
Some tax items affecting AMT is what the IRS calls "reports". These elements "reporter" tax under the regular tax system rather than simply lowering within a given year.
For example, accelerated depreciation allows you to take depreciation deductions early in the life of an asset, and finally deferred tax liabilities in future years. Once the impairment of an asset has been recognized, it is available to shelter taxable income in subsequent years.
The IRS is catching up in the following years by giving you an AMT credit if necessary. TaxAct can help calculate potential AMT amounts available on Form 8801, Credit for Prior Year Minimum Tax .
6. The AMT is complicated, but TaxAct done the hard work.
TaxAct can help determine if you are required to pay the AMT when you follow its guided Q and an interview. If the Form 6251 is required to complete your tax return, TaxAct complete the form using the information provided.
If you use a tax professional tax software or other in previous years, you can find the 6251 form in your back and see how the AMT has affected you.
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