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Do you need to think about the alternative

minimum tax?

April 18, 2017 by Reynolds & Rowella Leave a Comment

You may not have thought much about the alternative minimum tax, or AMT, since Congress passed a law that permanently fixed the exemption. But the tax, which you calculate separately from your regular tax liability, is still around. Here’s how the AMT might apply to your 2016 tax return.

Certain income and deductions, known as preference items, are added to or subtracted from the income shown on your federal income tax return to arrive at your AMT taxable income. For example, certain bond interest that you exclude from your regular taxable income must be included when computing income for the AMT. This is a “preference item” because tax-exempt interest gets preferential treatment under ordinary federal income tax rules.

AMT “adjustments” also affect whether you’ll owe the tax. These include personal exemptions and your standard deduction. In the AMT calculation, these taxable-income reducers are not deductible. Instead, they’re replaced with one flat exemption, which is generally the amount of income you can exclude from the AMT. For your 2016 return, the AMT exemption is $83,800 when you’re married filing a joint return or are a surviving spouse, $53,900 when you file as single, and $41,900 if you’re married and file separately. The exemption decreases once your income reaches a certain level.

Finally, only some itemized deductions, such as charitable contributions, are allowed in the AMT calculation. Others, including medical expenses and mortgage interest, are computed using less favorable rules.

Need help determining whether the AMT will apply to your 2016 return? Contact us at consulting@reynoldsrowella.com to discuss your situation.

 

Filed Under: Deductions 2016, Uncategorized Tagged With: Accounting Services Fairfield County CT, alternative minimum tax, Best Accounting Firms Fairfield County CT, Financial Planning Fairfield County CT, Tax Deductions for 2016, Tax Returns Fairfield County CT

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