Alternative Minimum Tax - AMT
Barron's Finance & Investment Dictionary:
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Alternative Minimum Tax - AMT
federal tax aimed at ensuring that wealthy individuals, trusts, estates, and corporations pay at least some income tax. For individuals, the AMT is computed by adding tax preference items to taxable income and making various adjustments to a taxpayer’s regular taxable income. Taxpayers must calculate their tax obligations through the regular tax system and through the AMT system, and pay the greater of the two amounts. The most common adjustments and tax preference items include
• addition of personal exemptions
• addition of the standard deduction, if claimed by the taxpayer
• addition of itemized deductions claimed for state and local taxes, certain interest, most miscellaneous deductions, and part of medical expenses
• subtraction of any refund of state and local taxes included in gross income
• changes to accelerated depreciation of certain property
• difference between gain and loss on the sale of property
• addition of certain income from incentive stock options
• change in certain passive activity loss deductions
• addition of certain depletion that is more than the adjusted basis of the property
• addition of part of the deduction for certain intangible drilling costs
• addition of tax-exempt interest on certain private activity bonds Taxpayers may have to pay the alternative minimum tax if their taxable income for regular tax purposes, combined with these adjustments and tax preference items, is more than $69,950 for married couples filing jointly, $46,200 for those filing as single or head of household, or $34,975 if married filing a separate return. The AMT tax rate on income up to $175,000 ($87,500 for a married couple filing separately) is 26% and 28% for income over $175,000.
Calculating the AMT can be extremely complex and is best left to a professional accountant.
See also amt patch.
• addition of personal exemptions
• addition of the standard deduction, if claimed by the taxpayer
• addition of itemized deductions claimed for state and local taxes, certain interest, most miscellaneous deductions, and part of medical expenses
• subtraction of any refund of state and local taxes included in gross income
• changes to accelerated depreciation of certain property
• difference between gain and loss on the sale of property
• addition of certain income from incentive stock options
• change in certain passive activity loss deductions
• addition of certain depletion that is more than the adjusted basis of the property
• addition of part of the deduction for certain intangible drilling costs
• addition of tax-exempt interest on certain private activity bonds Taxpayers may have to pay the alternative minimum tax if their taxable income for regular tax purposes, combined with these adjustments and tax preference items, is more than $69,950 for married couples filing jointly, $46,200 for those filing as single or head of household, or $34,975 if married filing a separate return. The AMT tax rate on income up to $175,000 ($87,500 for a married couple filing separately) is 26% and 28% for income over $175,000.
Calculating the AMT can be extremely complex and is best left to a professional accountant.
See also amt patch.
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Alternative Minimum Tax - AMT
Barron's Real Estate Dictionary:
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Alternative Minimum Tax - AMT
A type of flat-rate tax that applies to taxpayers who have certain types of income or deductions.
A 26% or 28% rate applies to broadly based income of individuals. A 20% rate applies to corporations. If this tax exceeds the regular income tax, then the alternative minimum tax is to be paid instead of the regular income tax. Originally introduced to assure that those at the highest income levels pay some tax, the AMT now noticeably affects the middle class as well.
See tax preference items.
A 26% or 28% rate applies to broadly based income of individuals. A 20% rate applies to corporations. If this tax exceeds the regular income tax, then the alternative minimum tax is to be paid instead of the regular income tax. Originally introduced to assure that those at the highest income levels pay some tax, the AMT now noticeably affects the middle class as well.
See tax preference items.
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| Alternative Mortgage Instrument (AMI), Amendment |
Barron's Law Dictionary:
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Alternative Minimum Tax - AMT
The AMT attempts to ensure that individuals who benefit from tax advantages such as deductions, credits, and exemptions pay at least a minimum amount of tax. It effectively creates a tax liability for individuals who would pay little or no tax. Every taxpayer is responsible for paying the higher of their regular tax or the minimum tax.
The AMT is controversial, as it applies to more and more taxpayers each year, beyond the intended targets of the tax.
Congress continues to revise the provisions of the AMT to provide temporary relief (see, e.g., H.R. 6275).
The AMT is controversial, as it applies to more and more taxpayers each year, beyond the intended targets of the tax.
Congress continues to revise the provisions of the AMT to provide temporary relief (see, e.g., H.R. 6275).
Investopedia Financial Dictionary:
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Alternative Minimum Tax - AMT
A tax calculation that adds certain tax preference items back into adjusted gross income. Alternative minimum tax (AMT) uses a separate set of rules to calculate taxable income after allowed deductions. Preferential deductions are added back, and then the AMT exemption is subtracted to get the AMT taxable income (AMTI). AMTI is then taxed at the current rate schedule to get tentative minimum tax (TMT). If TMT is higher than the regular tax liability for the year, the regular tax and the amount by which the TMT exceeds the regular tax are paid (i.e. the taxpayer pays the full TMT).
Investopedia Says:
AMT is designed to prevent taxpayers from escaping their fair share of tax liability through certain tax breaks, although the structure is rife with controversy as it is not indexed to inflation or tax cuts. This causes a condition known as "bracket creep", whereby upper-middle-income taxpayers are becoming subject to this tax. In 2006, the IRS National Taxpayer Advocate reported that the AMT often punishes taxpayers for having children or living in high-tax states.
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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Barron's Real Estate Dictionary
Dictionary of Real Estate Terms. Copyright © 2008 by Barron's Educational Series, Inc. All rights reserved.
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Barron's Law Dictionary
Law Dictionary. Copyright © 2003 by Barron's Educational Series, Inc. All rights reserved.
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