Tuesday, July 19, 2011

What is AMT (Alternative Minimum Tax)?

AMT stands for Alternative Minimum tax. Some people have to pay AMT in addition of regular income tax. It was introduced to prevent people with very high income to pay very little tax.

Everyone is required to calculate AMT when they file tax return. If someone is already paying that amount via regular income tax, that person doesn’t need to pay AMT. but if regular income tax is below calculated AMT, you will have to pay it.

How to calculate AMT?
There is not a clear cut answer for this as this depends on many things. Preferred deductions are added back while calculating AMT. If you are using tax software, it should calculate AMT for you. If you are not using tax software, you will need to file form 6251 in your tax return. Here is the link for this form from irs at the time of writing this: instruction for the same from irs site whie write this is here: filling this form Though it is not straight forward, irs website detail information to you to follow guidelines and fill up this form. You don’t need to be math expert to do so.

Who needs to file AMT?
AMT is imposed on Individuals, corporations, estates, and trusts

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