What is AMT?
AMT; Alternative minimum tax is an extra tax that is levied on some people above their regular income tax. It’s a supplemental income tax imposed by the U.S government required in addition to baseline income tax for certain individuals, corporations, estates, and trusts that have exemptions or special circumstances allowing for lower payments of standard income tax. It has its own set of rates and rules for deductions, which are less generous than the non-AMT rules. The Alternative minimum tax was introduced 42 years ago.
Who has to pay it?
A taxpayer can have AMT liability if he has high gross income, this can occur either because of one big item on a tax return, or because of a combination of many small items. Any taxpayer can be liable to pay AMT. The average AMT bill is between $2,000 and $15,000.
Following are the common cases on which AMT is applied:
- A couple filing a join return, with an income of $75,000 or more should definitely figure out the AMT calculations.
- Taxpayers with children; tax dependents
- People who take mortgage interest deductions, have capital gains, and have high state and local taxes.
If the amount of regular tax is higher than AMT figure, then you are not supposed to pay AMT. But if the regular tax is lower than the AMT figures then you are suppose to pay the difference.
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