AMT Rates and Exemptions

The alternative minimum tax (AMT) method provides each taxpayer with a flat dollar amount that is completely exempt from tax. The dollar amount of your exemption depends on your filing status.

The exemption amounts for 2014 are:

• $82,600 if married filing jointly or as a surviving spouse
• $52,800 if single or a head of household
• $41,050 if married filing separately

These amounts are indexed for inflation.

AMT exemption phaseout. In keeping with the congressional purpose to extract tax from high-income individuals, the AMT exclusion amount is phased out as one's income increases. The exemption amounts are reduced 25 percent for each $1 of the excess of AMTI over:

• $156,500 for married individuals filing a joint return,
• $117,300 for single individuals other than surviving spouses; and
• $78,250 for married individuals filing a separate return.

Calculating the tax due. If your taxable income for AMT purposes (called AMTI) exceeds the exemption amount, you will be subject to a 26 percent AMT rate on the first $182,500 of AMTI ($91,250 for married taxpayers filing separately) that exceeds the exemption amount, and a 28 percent rate on any AMTI above this $182,500 amount. This results in your tentative minimum tax.

A taxpayer's AMT for a tax year is the excess of their tentative minimum tax over regular tax liability. AMT must be paid in addition to the regular tax liability and other federal taxes owed. Thus, if your tentative minimum tax for a tax year is $75,000 while your regular tax liability is $50,000, you must pay an AMT of $25,000 in addition to the $50,000 regular tax for a total tax liability of $75,000.

Work Smart There's no doubt about it--the AMT can play havoc with your tax planning. If your AMT liability and your regular tax liability tend to be approximately equal from year to year, your best bet is to maintain this stability. If your deductions are not so evenly spaced and you tend to have great fluctuations in income from year to year, you may be able to shift some AMT-triggering items from an AMT year to a non-AMT year, so as to reduce your liability in a non-AMT year almost to the point at which you would become subject to the AMT. Your tax professional can tell you whether this might be possible in your individual situation.

© 2024 Wolters Kluwer. All Rights Reserved.