The alternative minimum tax (AMT) is calculated using a different set of rules meant to ensure certain taxpayers pay at least a minimum amount of income tax. AMT calculations limit certain breaks for some taxpayers so their tax bill is higher. AMT rates are 26% or 28%.
For the 2020 tax year, the threshold is $197,900 of AMT taxable income for taxpayers filing as single and as married couples filing jointly. It is $98,950 for married couples filing separately.
An alternative minimum tax (AMT) places a floor on the percentage of taxes that a filer must pay to the government, no matter how many deductions or credits the filer may claim. The AMT recalculates income tax after adding certain tax preference items back into adjusted gross income.
Taxpayers pay the higher of their tax calculated under regular income tax rules or under the rules for the alternative minimum tax (AMT). In 2017—before enactment of the Tax Cuts and Jobs Act (TCJA)— the 39.6 percent top rate under the regular income tax was much higher than the 28 percent top statutory AMT rate.
The AMT is levied at two rates: 26 percent and 28 percent. The AMT exemption amount for 2020 is $72,900 for singles and $113,400 for married couples filing jointly (Table 3). In 2020, the 28 percent AMT rate applies to excess AMTI of $197,900 for all taxpayers ($98,950 for married couples filing separate returns).
Also try deferring any bonus payments, which may have more flexibility than regular income. By reducing your adjusted gross income, you may be able to avoid the AMT entirely.
The standard deduction is not available for AMT purposes. Nor is the itemized deduction for state and local taxes available for AMT purposes. If you are subject to the alternative minimum tax, it may be useful to itemize deductions even if itemized deductions are less than the standard deduction amount.
Changes under Trump
The Tax Cuts and Jobs Act blunted the effect of the AMT in two ways, subjecting fewer households to this levy. First, the new law increased the AMT exemption. ... For the 2020 tax year, the exemption is $72,900 for singles and $113,400 for married couples.
You may need to file Form 6251 if you have specific AMT items. If you need to report any of the following items on your tax return, you must file Form 6251, Alternative Minimum Tax, even if you do not owe AMT. Home mortgage interest on a loan that you did not use to buy, build or improve your home.
Claim the AMT credit while filing your current year tax return by filling out Form 8801 and filing it along with your tax return. Carryforward and track the remaining credit you were not allowed to use in the current year.
The simplest way to see why you are paying the AMT, or how close you came to paying it, is to look at your Form 6251 from last year. Compare the Tentative Minimum Tax to your regular tax (Tentative Minimum Tax should be the line above your regular tax) to see how close you were to paying the AMT.
Under the tax law, certain tax benefits can significantly reduce a taxpayer's regular tax amount. The alternative minimum tax (AMT) applies to taxpayers with high economic income by setting a limit on those benefits. It helps to ensure that those taxpayers pay at least a minimum amount of tax.
The AMT exemption amount for 2019 is $71,700 for singles and $111,700 for married couples filing jointly (Table 3). In 2019, the 28 percent AMT rate applies to excess AMTI of $194,800 for all taxpayers ($97,400 for married couples filing separate returns).
Yet No Comments