Alternative Minimum Tax

The alternative minimum tax (AMT) can be proposed on an adjusted amount of taxable income, which is done by claiming certain deductions (called exemptions). It is a flat rate that certain businesses can claim to reduce the amount they have to pay at the end of the year.

The alternative minimum tax typically applies to C Corporations, estates, and trusts. Individuals can use this rate on certain assets – such as stock options and company stock purchase plans. The AMT rate will vary, and the exact amount will depend on the taxpayer.

Tax Exemptions

alternative minimum tax
alternative minimum tax

An exemption is a type of tax deduction, which can be used to reduce your taxable income. Personal deductions are not allowed under the AMT rate, as it only applies to certain corporations, estates, and trusts. If there are any assets related to these entities, you can use any losses you have incurred to reduce your taxable income at the end of the year.

Corporations will be able to make adjustments to their taxable income while they are calculating their Adjusted Current Earnings (ACC), but this rule only applies to assets that have been acquired before 1989.

Adjustments will also have to be made about the following:

  • Long-term contracts
  • Mine exploration and development costs

You should also bear in mind that pollution control expenses are not deductible, but you can receive a credit for any expenses related to alcohol or diesel fuel.

AMT Exemptions for Individuals

The alternative minimum tax doesn’t offer a great deal of exemptions for individuals, but there are some expenses that can be deducted. Medical expenses can be used to reduce your taxable income if the amount is more than 10% of your gross income.

Certain interest expenses can also be deducted, but only if they are related to investment accounts. Any non-business interest expenses (such as credit card interest) are not deductible under the alternative minimum tax. Also, any expenses related to stock options (or stocks that have been acquired under an employee purchase plan) are deductible under the alternative minimum tax.

Help with Filing under the AMT

Tax laws can be complicated, and so can the alternative minimum tax. That’s why it pays to hire a professional to help you to file a proper return. It’s important to understand which expenses can be deducted, and which ones cannot. But most importantly, you have to have to understand every aspect of Tax Law.

You can try to do it yourself, but a tax professional will have a more detailed knowledge of current tax regulations. Tax Law Tampa has a team of experts that can help you file under the alternative minimum tax. So, if you want to find out more, get in touch with them today!