alternative minimum tax
Recent Examples of alternative minimum tax from the Web
The pass-through provision, along with the elimination of the alternative minimum tax, should allow this couple to cut its current tax bill of $128,000 by about $25,000, according to a statement issued by the House Ways and Means Committee.
Republican President Donald Trump has proposed abolishing the alternative minimum tax. in his itemized deductions, Snyder reported paying close to $108,000 in real estate taxes and just under $22,000 in state and local income taxes.
Many higher-income households already have their state and local tax breaks curtailed under the alternative minimum tax.
But the same family could benefit from the elimination of the alternative minimum tax.
The impact on the highest wage-earners, like President Trump, seems clear, with the elimination of the alternative minimum tax, the estate tax and the lowering of the top tax rate providing substantial benefit.
There's also likely a gap in benefits between the upper middle class and the outright rich, who are more primed to benefit from features like repealing the estate tax, ending the alternative minimum tax, and lowering pass-through rates.
But more realistic legislative targets are lowering tax rates on individuals and corporations as well as eliminating the estate tax and alternative minimum tax.
Provisions such as the alternative minimum tax and the estate tax, a tax on inherited wealth which Trump has derided over the years, would be gone under the Republican proposal.
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First Known Use of alternative minimum tax
Financial Definition of ALTERNATIVE MINIMUM TAX
What It Is
How It Works
Taxpayers must calculate their AMT separately from their "regular" taxes calculated on IRS Form 1040. The AMT, which is calculated using IRS Form 6251, starts with the taxpayer's taxable income (income after personal exemptions and standard or itemized deductions) and adds back various adjustments to arrive at a net alternative taxable income. The AMT rules disallow many personal exemptions and many deductions. The resulting higher taxable income is then taxed at flat rate. The taxpayer compares the tax calculated under the AMT method to the tax calculated under the "regular" method and owes the higher of the two.
The exemption amounts for figuring AMT change each year, so it's important to refer to the IRS instructions or a tax professional.
Why It Matters
The goal of the AMT is to ensure that everyone pays at least some income tax. This is why the AMT calculations effectively eliminate several types of deductions and credits, creating a tax liability for a person who would otherwise pay little or no tax.
The AMT system is complicated and controversial. Its elimination of many deductions and credits particularly affect people with large amounts of itemized deductions, people with many children or dependents, people who exercise incentive stock options, and those who pay high state and local taxes or high personal property taxes. Also, because the AMT thresholds have not been frequently adjusted for inflation, more and more middle-income taxpayers are subject to AMT.
The AMT is a good example of why taxpayers should take the time to plan for taxes and consult a tax professional. In some cases, those liable for AMT may be able to lower their total tax bills by claiming itemized deductions on Form 1040, even if their total itemized deductions are less than the standard deduction. This is because the AMT system does not allow the standard deduction, and if a taxpayer claims the standard agency bond on Form 1040, he or she cannot claim itemized deductions for the AMT, according to the IRS. This could result in a lower tax bill even though the taxpayer has claimed fewer deductions.
[InvestingAnswers Feature: The AMT Trap and How to Avoid It]
alternative minimum tax
legal Definition of alternative minimum tax
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