What is the Alternative Minimum Tax?
There are actually TWO distinct Federal tax systems in operating, the regular
tax (as calculated on the series 1040 forms and applicable to most people) and
the alternative minimum tax (AMT). The latter applies generally to those whose
deductions or tax-favored income include "tax preferences" which need to be added
back in determining the calculation of the AMT, which is done on Form 6251.
The tax law gives special treatment to some kinds of income and allows special
deductions and credits for some kinds of expenses. Taxpayers who benefit from
the law in these ways may have to pay at least a minimum amount of tax through
an additional tax. This additional tax is called the alternative minimum tax
You may have to pay the alternative minimum tax if your taxable income for
regular tax purposes, combined with certain adjustments and tax preference items,
is more than:
$58,000 if your filing status is married filing joint (or qualifying widow(er)
with dependent child),
$40,250 if your filing status is single or head of household, or
$29,000 if your filing status is married filing separate.
Adjustments and tax preference items. The more common adjustments and
tax preference items include:
Addition of personal exemptions,
Addition of the standard deduction (if claimed),
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
Changes to accelerated depreciation of certain property,
Difference between gain or loss on the sale of property reported
for regular tax purposes and AMT purposes,
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.