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 you if your income is above a certain amount. Here are five facts the IRS wants you to know about the AMT:
- You may have to pay the tax if your taxable income plus certain adjustments is more than the AMT exemption amount for your filing status.
- The 2012 AMT exemption amounts for each filing status are:
- Single and Head of Household = $50,600;
- Married Filing Joint and Qualifying Widow(er) = $78,750; and
- Married Filing Separate = $39,375.
- AMT attempts to ensure that some individuals and corporations who claim certain exclusions, tax deductions and tax credits pay a minimum amount of tax.
- You should use IRS e-file to prepare and file your tax return. You figure AMT using different rules than those you use to figure your regular income tax. IRS e-file software will determine if you owe AMT, and if you do, it will figure the tax for your.
- If you file a paper return, use the AMT Assistant tool on IRS.gov to find out if you may need to pay the tax.
Visit IRS.gov for more information about AMT. You should also check Form 6251, Alternative Minimum Tax – Individuals and its instructions. Both are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).