Originally created to make sure the wealthy paid taxes even after using tax breaks and loopholes, the Alternative Minimum Tax (AMT) has never been updated and continues to impact middle class Americans more and more each year as a result of inflation. To compensate for inflation, the AMT now includes an exemption amount. This exemption is indexed for inflation so it changes every year.
Hello, I’m Nick from TurboTax with some helpful information about the alternative minimum tax, or AMT.
The Alternative Minimum Tax, or AMT, was introduced in 1969 to ensure that the wealthiest Americans paid taxes, even after using tax breaks and loopholes, but the AMT was never updated to account for inflation. Every year, more of the middle class was caught up in it.
To compensate for inflation, the AMT now includes an exemption amount. This exemption is indexed for inflation so it changes every year.
For the 2017 tax year, the exemption amount is:
- $54,300 for single taxpayers;
- $84,500 for married taxpayers filing jointly;
- $42,250 for married individuals filing separately; and
- $54,300 if you’re filing your taxes as a head of household.
If your taxable income isn’t above these levels, you shouldn’t have to pay the AMT.
However, to calculate whether the AMT applies to you, you need to use Form 6251. It begins by using your Adjusted Gross Income After Itemized Deductions from your 1040 form. Many of the itemized deductions that you were able to take under the standard tax calculations are then added back into your income for the AMT.
If the tax calculated on Form 6251 is higher than what is calculated on your regular tax return, you will have to pay the difference as AMT, in addition to your regular tax amount.
For more tips and information to help you get your taxes done smarter, visit TurboTax.com.
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