You may not know about the Alternative Minimum Tax (AMT) because you’ve never had to pay it before. However, your income may have changed and you may have to pay it this year.
What is the Alternative Minimum Tax? It is an income tax imposed at nearly a flat rate on an adjusted amount of taxable income above a certain threshold. If you have higher income, you may be subject to the AMT.
Here are some things you should know about AMT:
1. Know when the AMT applies. You may have to pay the AMT if your taxable income, plus certain adjustments, is more than your AMT exemption amount. Your filing status and income define the amount of your exemption. In most cases, if your income is below this amount, you will not owe the AMT.
2. Know exemption amounts. The 2015 AMT exemption amounts are:
- $53,600 if you are Single and Head of Household.
- $83,400 if you are Married Filing Jointly or Qualifying Widow(er).
- $41,700 if you are Married Filing Separately.
You will reduce your AMT exemption if your income is more than a certain amount.
3. The AMT rules are complex. The law sets the AMT exemption amounts and AMT tax rates. As always it’s important to speak with your tax adviser to make sure that the it is calculated and filed properly.
4. Some tax credits that reduce regular tax liability do not reduce the AMT tax liability.
5. Taxpayers can use the special capital gains rates in effect for the regular tax. However, they must be lower than the AMT tax rates that would otherwise apply.
6 . The IRS has an AMT Assistant tool to find out if you need to pay the tax.