| The AMT Advisor |
| Answers to All Your Alternative Minimum Tax Questions |
How to submit a question to the AMT Advisor **************************** What is the AMT? AMT Adjustments AMT Preferences AMT Forms Minimum Tax Credit *************************** Alternative Minimum Tax Amounts AMT Exemption Amounts Before Phase-Out: Taxpayers Filing Single or Head of Household : 2007 - $44,350 2008 - $46,200 2009 - $46,700 2010 - $47,450 2011 - $48,450 Married Filing Jointly or Qualifying Widower: 2007 - $66,250 2008 - $69,950 2009 - $70,950 2010 - $72,450 2011 - $74,450 Married Filing Separately: 2007 - $33,125 2008 - $34,975 2009 - $35,475 2010 - $36,225 2011 - $37,225 AMT Exemption Phase-Out Thresholds: The AMT exemption is reduced by 25% of the amount that alternative minimum taxable income exceeds for: Single or Head of Household - $112,500 Married Filing Jointly or Qualifying Widowers - $150,000 Married Filing Separately- $75,000 |
The AMT Exemption Because the alternative minimum tax (AMT) was never intended to apply to lower and middle income taxpayers who have small amounts of AMT adjustment or preference items, a feature was built into the system to prevent this from occurring. This feature is the AMT exemption. The AMT exemption is an amount that a taxpayer is allowed to deduct from alternative minimum taxable income before calculating the taxpayer’s AMT liability. The amount of the exemption for a particular taxpayer depends on the taxpayer’s filing status. To prevent upper-income taxpayers from benefiting from the AMT exemption, the exemption phases out after a taxpayer’s AMTI reaches a certain level, also based on the taxpayer’s filing status. AMT Exemption Amounts For 2011, the AMT exemption amounts for taxpayers not subject to the exemption phase-out are: A child subject to the kiddie tax rules for regular tax purposes determines his or her AMT exemption under special rules In Code Sec. 59(j)(1). The AMT exemption for children subject to the kiddie tax is the lesser of the AMT exemption for a single taxpayer or the total of the child's earned income plus $5,000, indexed for inflation. For 2011, the amount indexed for inflation is $6,800 Exemption Phase-Out and Phase-Out Thresholds Exemption phase-out formula: The exemption amount is reduced one dollar for every four dollars of AMTI above the threshold amount for the taxpayer’s filing status. Exemption phase-out thresholds: The phase-out thresholds are:
$175,000 in 2011. Their AMT exemption is $68,200, which is the full exemption amount of $74,450 less .25($175,000 - $150,000) or $6,250. AMTI level of complete phase-out: Because the AMT exemption phase-out is controlled by the amount of the exemption for a filing status and the amount that AMTI exceeds the phase-out threshold for that filing status, there is a common AMTI level where the exemption for each filing status phases out completely for all taxpayers in each filing status. The exemption phases out completely at the following levels of AMTI in 2011: Practical Effect of the Exemption Phase-out Although taxpayers with AMTI above the phase-out threshold still calculate their AMT liability using the same rate as taxpayers that are not subject to exemption phase-out, the loss of the exemption raises the taxpayer’s effective AMT tax rate. This occurs because for each $1 of income in the phase-out range, the amount of AMTI actually subject to tax increases by $1.25. This results in an effective AMT rate of 35% (instead of 28%) for AMTI in the phase-out range. Have a question about the AMT Exemption rules? Click here to find out how to submit a question to the AMT Advisor. |
 | |  | |  |
|
|
|