J.K. Lasser's Small Business Taxes 2022

CHAPTER 29Alternative Minimum Tax

1. Alternative Minimum Tax Basics
2. Deduction Limits for Alternative Minimum Tax
3. Credit Offsets
4. Minimum Tax Credit

Reducing regular tax is only part of the battle that a small business owner wages to increase after-tax returns. Minimizing or avoiding alternative minimum tax (AMT) where applicable is another important front that must be addressed. Some business owners may find themselves subject to AMT if they have certain substantial deductions and/or credits. C corporations are not subject to the AMT, so the balance of this chapter refers to the AMT for individuals (i.e., owners of pass-through entities).

Alternative Minimum Tax Basics

Alternative minimum tax is designed to ensure that all taxpayers pay at least some tax. Years ago, with tax shelters and other loopholes, wealthy individuals and corporations often paid little or no tax. In an effort to make all taxpayers share the tax burden, an AMT was imposed.

The AMT is a separate tax system, with its own deductions and tax rates. A taxpayer computes the regular income tax as well as a tentative AMT. The extent to which the tentative AMT exceeds regular tax liability is reported as AMT.

Alternative minimum tax liability for individuals can be reduced by certain personal tax credits, including a limited foreign tax credit (corporations can reduce their AMT liability only by a limited foreign tax credit).

Individuals have a two-tier AMT rate structure of 26% on the first $199,900 of income ...