AMT Alternative Minimum Tax

The AMT is designed to catch people who avoid paying taxes due to certain tax breaks.

What is the AMT?
In 1969, Congress created the AMT to ensure wealthy Americans did not avoid paying their federal income tax by taking large deductions. The Tax Increase Prevention Act 2007 (TIPRA 2007) provides a 1-year patch, raising AMT exemptions for 2007.

Who is affected?
You're subject to the AMT if the AMT exceeds your regular tax figured from tax tables and rate schedules. In other words, you pay whichever amount is more, your regular tax or the AMT.

Several factors influence if you're affected by the tax, including these common scenarios:
You itemized deductions and claimed large deductions for taxes and/or miscellaneous deductions subject to the 2% adjusted gross income limit.
You took out a home mortgage or equity line of credit and used the money to do something other than buy, build or improve your home.
You exercised incentive stock options and did not dispose of the stock in 2007.
You claimed a large number of personal and dependent exemptions on your return.

AMT exemption amounts are $66,250 for Married Filing Jointly and Qualifying Widow(er), $44,350 for Single or Head of Household, and $33,125 for Married Filing Separately.

Phase-out rules for the AMT. The phase-out range is based upon alternative minimum taxable income (AMTI). The phase-out ranges for 2007 are based upon the following AMTI amounts:
Married Filing Jointly and Qualifying Widow(er): $150,000 to $415,000
Single and Head of Household: $112,500 to $289,000
Married Filing Separately: $75,000 to $207,500

The only itemized deductions allowed under the AMT are mortgage interest used to buy, build or improve your home, charitable contributions, casualty losses, medical expenses in excess of 10% of adjusted gross income (AGI), and miscellaneous itemized deductions not subject to the 2% of AGI floor.

Personal exemptions and itemized deductions for state and local taxes which reduce regular taxable income, aren't deductible under the AMT. The only itemized deductions allowed under the AMT are mortgage interest used to buy, build or improve your home, charitable contributions, casualty losses, medical expenses in excess of 10% of AGI, and miscellaneous itemized deductions not subject to the 2% of AGI floor. Therefore taxpayers in certain income ranges, who itemize and have larger families may be hit hardest by the AMT. Married taxpayers across a wide income range will be affected, whether they itemize or not.

Every year taxpayers need to consider whether they will have to pay the Alternative Minimum Tax (AMT). The IRS Online AMT Assistant is intended to provide a simple test for taxpayers who fill out their tax returns without using software. The AMT Assistant is easy to use. You just answer a few simple questions about entries on your draft 1040 and the system does the rest. You will see the results immediately on your computer screen. Your entries are anonymous, and all entries are erased when you exit or start over.

To locate the assistant perform a internet search IRS AMT Assistant
The Assistant can be used by individuals, tax practitioners and community or public service organizations.

States that have many taxpayers with large incomes and pay their state's high state and local taxes are more affected. Although these taxes are deductible for regular income tax purposes, they aren't for AMT purposes, increasing the likelihood of paying AMT.

Taxpayers in states with low tax rates or that don't have a state income tax are less affected and likely to pay AMT.

Tax help is available for anyone in any of the following states and overseas, Alabama AL, Alaska AK, Arizona AZ, Arkansas AR, California CA, Colorado CO, Connecticut CT, Delaware DE, District of Columbia DC, Florida FL, Georgia GA, Hawaii H, Idaho ID, Illinois IL, Indiana IN, Iowa IA, Kansas KS, Kentucky KY, Louisiana LA, Maine ME, Maryland MD, Massachusetts MA, Michigan MI, Minnesota MN, Mississippi MS, Missouri MO, Montana MT, Nebraska NE, Nevada NV, New Hampshire NH, New Jersey NJ, New Mexico NM, New York NY, North Carolina NC, North Dakota ND, Ohio OH, Oklahoma OK, Oregon OR, Pennsylvania PA, Rhode Island RI, South Carolina, South Dakota, Tennessee TN, Texas TX, Utah UT, Vermont VT, Virginia VA, Washington WA, West Virginia WV, Wisconsin WI, and Wyoming, WY

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