Alternative Minimum Tax 

 

Alternative Minimum Tax (AMT) is an additional tax system that runs in parallel to the regular tax system. AMT tax potentially adds another layer of tax to taxpayer when taxpayer's income surpasses AMT exemption amounts. AMT tax was instituted in 1969 to originally target rich persons. However, for many decades since 1969 the AMT exemption amounts were not indexed to inflation until recently, as a result, today more and more middle-class taxpayers are exposed to this tax layer. Per IRS Publication 514 and Tax Topic 556, taxpayers are liable for this tax in addition to their regular income tax if their tentative AMT tax is higher than their regular income tax. The total of combined two taxes each year sometimes are way too high for taxpayers.  

For 2016 tax year, AMT exemption amounts are about $53,900 for Single Taxpayers, $83,800 for Married Taxpayer Filing Jointly, $41,900 for Married Filing Separately, $53,900 for Head of Household. Though recent tax laws change to factor inflation to AMT exemptions annually going forward, these exemptions look like too low when more and more taxpayers these days have higher income.

Alternative Minimum Tax system is set up in a complex and sophisticated way that leaves little latitude for taxpayers to breathe. Talk to your trusted tax advisor about your situation if you believe you have paid so much AMT tax.  

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