Alternative Minimum Tax

The alternative minimum tax (AMT) is part of the federal income tax system set up by the government of the U.S. There are two categories to consider when deciding whether or not you will have to use the alternative minimum tax when filing your taxes. They are labeled under personal income tax or corporate income tax.

The purpose of this tax is to charge the taxpayer an extra tax depending on how much income they make. This tax is a separately figured tax that reduces the amount of deductions and credits that would normally allow the taxpayer to be able to pay a less amount of taxes. The tax rates to figure this tax on ordinary income are set by law. For capital gains and certain dividends the regular tax rate is used.

There may be a possibility that the taxpayer will have to use the AMT if their regular income plus any adjustments or preference items that apply to them are more than the exemption amount for the AMT. Each filing status has a set amount set by law and is listed in the form 6251 instructions. In order for the taxpayer to figure out whether or not you need to use the AMT, go to the AMT worksheet in the form 1040 instructions. The worksheet might tell you that you don't owe anything or it might send you to fill out form 6251. If you are sent to the form, you will have to complete it in order to figure out whether or not you will owe the AMT.

If you do not owe the AMT for this tax year, but have had to pay it in the past year or years, you may be eligible to take a special minimum tax credit for this taxable year. If it turns out that you are eligible, you will need to complete and attach form 8801.