Chapter 23 Alternative Minimum Tax (AMT)

The purpose of AMT is to effectively take back some of the tax breaks allowed for regular tax purposes. The AMT is an additional tax that you may owe if for regular tax purposes you claimed:

  • Itemized deductions, such as taxes, interest on home equity loans used for nonresidential purposes, medical expenses, and miscellaneous job and investment expenses.
  • Certain tax-exempt interest, accelerated depreciation, and incentive stock option benefits.
  • A substantial number of exemptions for dependents.

There are no specific tests to determine whether or not you are liable for AMT. You must first figure your regular income tax and then see whether tax benefit items must be added back to taxable income to figure alternative minimum taxable income, on which the AMT is figured. If after claiming the AMT exemption and applying the AMT rates of 26% and 28% the tentative alternative minimum tax exceeds your regular income tax, the excess is your AMT liability, which is added to the regular tax on your return. In other words, your tax liability for the year will be the greater of your regular tax or your AMT.

AMT liability is figured on Form 6251 and is attached to Form 1040. If you file Form 1040A, AMT liability, if any, is figured on a worksheet and the AMT ...

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