Are you susceptible to the Alternative Minimum Tax? Click here to find out and how to calculate the AMT.
The Alternative Minimum Tax (AMT) has been a thorn in the side of very wealthy higher income earners for decades but is increasingly affecting middle class families. Anyone with income in the $200,000 to $1,000,000 range is susceptible to the Alternative Minimum Tax, which is applied if it is higher than the tax liability calculated under standard tax calculations.
The taxes payable to the IRS are the higher of the tax liability you calculate under regular tax rules and the Alternative Minimum Tax liability. Good tax software can perform the AMT calculation for you by comparing your Form 1040 standard tax liability with your Form 6251 AMT tax liability.
Fewer Alternative Minimum Tax brackets exist compared to Federal Income tax brackets.
Federal Income tax rates can be as low as 10% and as high as 39.6%. Seven Federal Income tax brackets fall within that range based on the progressive tax system. Fewer AMT tax brackets exist, either 26% of 28%.
If you've struggled with trading techniques in the past and watched your mistakes affect your bottom line, you're not alone-but you can change that starting now!
I'm trading expert Thomas Wood and my e-guide, "Naked Trading Mastery" could give you the edge you need to make earning consistently easier than ever!
Get your free copy here!
Maximizing contributions to retirement accounts, deferring sale of investments that trigger long-term capital gains and reducing itemized deductions can lower Alternative Minimum Tax liability.
The Alternative Minimum Tax has been controversial for a long time and speculation surfaces from time to time that it will be abolished. Until then, a good tax preparer and good tax software are your allies in lowering your AMT tax liability.
Your tax preparer can help you identify ways to lower future tax liabilities but if you have been saddled with an Alternative Minimum Tax liability this year, it may be tough to find a way to lower the amount owed.
Some of the more common ways to lower AMT tax liabilities in the future include:
➤ Free Guide: 5 Ways To Automate Your Retirement
AMT exemption levels are adjusted annually for inflation.
Above threshold levels, exemptions phase out gradually and then completely. In 2016, for single filers, the exemption fully phases out for income levels of $335,300 and for married couples filing jointly, the AMT exemption phases out above $494,400.
Single | Married, filing separately | Married, filing jointly | |
Income level when exemption fully phases out | $335,300 | $247,450 | $494,400 |
Above certain income levels, the 26% rate kicks in while higher earners will see the 28% AMT rate kick in for the 2016 tax year as follows:
Single | Married, filing separately | Married, filing jointly | |
Amount of Income Exempt from AMT (26% rate kicks in above these levels) | $53,900 | 41,900 | $83,800 |
Income Level at which Exemption Starts to Phase Out | $119,700 | 79,850 | $159,700 |
28% Tax Rate Kicks In Above These Income Levels | $186,300 | $93,150 | $186,300 |
Most deductions and credits permissible when calculating taxes normally are not allowed under AMT rules.
Although charitable contributions may be deducted under AMT, most other deductions and credits which offer tax breaks under regular tax rules are prohibited. The following tax breaks are not allowed:
Interest generally is not permitted as a deduction either but mortgage interest is unless it’s part of a home-equity loan in which case a tax preparer may be needed.
We could be facing one of the harshest economic challenges ever experienced thanks to an incompetent government and severe global unrest. If you aren't proactive, you could see yourself and your family become another financial casualty. But, the Inflation Survival Plan has you covered. Learn insider tips and tricks, IRS loopholes and more that will help your finances soar.
Take 15 Seconds to get the FREE Inflation Survival Plan and ensure your family's financial security.
Money received from life insurance policy is tax-free when a person is deceased but life insurance policy proceeds received when someone is alive are taxable.
Over and above the various income levels described above which can trigger AMT, married couples, high-income earners, taxpayers with many dependents and those living in high income tax states are at higher risk of AMT.
If you are uncertain whether you are at risk of AMT, ask your tax preparer or use one of the best tax software packages to calculate your AMT tax liability.
Discover the top 3 hidden AI stocks that could hand you profits of 874% of more!
ChatGPT is the fastest growing app EVER – hitting 100 million users!
Jeff Bezos… Bill Gates… and Elon Musk are betting billions on this "game changing" technology. And you can get in on the ground floor.
Click here to download it for free – with no strings attached.
SoFi Personal Loans Review: Borrowers with excellent credit histories can get fixed or variable rate…
Personal Capital pairs clients who enroll in its robo-advisory service with dedicated financial advisors. This…
A Historic Night at Super Bowl LIX On the grand stage of Super Bowl LIX,…
YieldStreet Review: YieldStreet was ranked among the most rapidly expanding financial services firm in the…
Brad Pitt has evolved from a handsome leading man of Hollywood blockbusters into a multifaceted…
2 Chainz Net Worth: 2 Chainz net worth is estimated at around $9 million.Read more…
This website uses cookies.