The alternative minimum tax (AMT) applies to taxpayers with high economic incomes and helps to ensure that those taxpayers pay at least a minimum amount of tax.

AMT exemptions for 2017:

  • $84,500 for married couples filing jointly
  • $54,300 for singles and heads of household.

The phaseout zones for the exemptions start at higher income levels

  • above $160,900 for couples
  • and $120,700 for single filers and household heads.

The 28% AMT bracket starts above $187,800 of alternative minimum taxable income.

If you are not liable for AMT this year, but you paid AMT in one or more previous years, you may be eligible to take a special minimum tax credit against your regular tax this year on timing AMT items (not on permanent (P) items that will not reverse in the future).

The most common AMT adjustments:

  • The standard deduction; it is not allowed for the AMT (P)
  • Personal exemption deductions (P)
  • Certain adjustments are required for itemized deductions in computing the AMT such as medical expenses (10% AGI for 65 or older), home equity interest expenses, state and local taxes and miscellaneous items (P)
  • The difference between the regular tax MACRS deduction and the AMT cost recovery deduction
  • Other decelerated AMT Deductions
  • Passive activity losses and net operating losses may be allowed for purposes of the AMT, but the losses must be computed using AMT rules
  • The long term construction contracts percentage of completion method is always required for the AMT
  • Since different cost recovery methods are used for regular tax and AMT purposes,  assets have different adjusted bases and different gain or loss amounts upon disposition
  • For incentive stock option exercise, the spread between the option price and the fair market value of the stock on the date of exercise is reported as income
  • The most common AMT preferences are:
    • Adjusted expenses such as interest expense incurred on a loan to purchase private activity bonds will be deductible for AMT purposes.
    • Excess depreciation on pre-87 realty (P)
    • Excess percentage depletion (P)

Corporations are subject to an alternative minimum tax (AMT) in much the same manner that individuals are.

I created this blog to help understand certain basic aspects of U.S. tax law. Of course, each situation is unique and nothing that is on this site will ever replace the expert advice of a tax professional.

Please do not hesitate to contact me should you have any question