You may not be aware of this, since income taxes are so complicated that not a lot of folks do much digging into the nuances, but there is another income tax rate that could affect you in certain circumstances. This other income tax is called the Alternative Minimum Tax, or AMT. This “alternative” tax applies when you have income above certain thresholds. Essentially it ensures that you pay a certain minimum amount of income tax if your deductions reduce your income so much that your ordinary income tax falls below the minimum applied by the AMT. It gets pretty complicated, but I’ll go over the high points below. Alternative Minimum Tax (AMT) AMT has a separate set of rules for definitions of income and expenses, rules for accounting and timing, and exemptions and tax rates. AMT limits the tax benefit of certain types of income and deductions, otherwise available to […]
alternative minimum tax
What You Need to Know About the Alternative Minimum Tax (AMT)
When you have high taxable income and certain deductions and exclusions from income, you may be subject to the Alternative Minimum Tax, or AMT. This is a nearly flat-tax, which excludes a higher amount of income from the regular income tax. For 2012 taxes, the exclusion of income is $50,600 for singles, and $78,750 for married couples. The “nearly flat” tax rate starts at 26% and the upper end rate is 28%. Under the AMT, no deduction is allowed for the standard deduction, or for personal exemptions. State and local taxes are also not allowed to be deducted from your income. Your other itemized deductions are allowed, at least to a certain extent. Recently the IRS issued their Tax Tip 2013-17, which lists Five Facts to Know About AMT. The actual text of this Tip is below. Five Facts to Know about AMT The Alternative Minimum Tax may apply to […]
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