Alternative Minimum Tax

The tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain kinds of expenses. The alternative minimum tax (AMT) attempts to ensure that anyone who benefits from these tax advantages pays at least a minimum amount of tax.

The AMT is a separately figured tax that eliminates many deductions and credits, thus increasing tax liability for an individual who would otherwise pay less tax. The tentative minimum tax rates on ordinary income are percentages set by law. For capital gains and certain dividends, the rates in effect for the regular tax are used.

You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount. The exemption amounts are set by law for each filing status and are listed in the Instructions 6251.

To find out if you may be subject to the AMT, refer to the Instructions 1040 (General Inst.) and the Instructions 1040-A. If you are filing the Form 1040 you may use the AMT Assistant for Individuals, which is an electronic version of the AMT worksheet available on the IRS webpage at www.irs.gov. The AMT worksheet may tell you that you do not owe the AMT or it may direct you to Form 6251, Alternative Minimum Tax - Individuals. If you are directed to Form 6251, you will have to complete that form to determine whether you owe the AMT. Form 6251, Alternative Minimum Tax - Individuals, is available in a PDF format on the IRS web page.

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. If eligible, you should complete and attach Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts.