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TAXES
> Individuals > Other
Taxes > Alternative Minimum Tax (Form 6251)
The
alternative minimum tax is the excess of the tentative minimum tax over
the regular tax and prevents a taxpayer with substantial income from avoiding
significant tax liability through the use of exclusions, deductions, and
credits. For a taxpayer filing other than married separately, the tentative
minimum tax is 26% of the "taxable excess" that doesn't exceed $175,000,
plus 28% of the taxable excess above $175,000, reduced by the AMT foreign
tax credit for the tax year. "Taxable excess" is the excess of alternative
minimum taxable income for the tax year over the "exemption amount" of
$175,000 ($87,500 for maried filing separately). Alternative minimum taxable
income is taxable income plus or minus various "adjustments," plus tax
preferences
The exempt portion of alternative minimum taxable income (AMTI) is:
married individuals filing jointly and surviving spouses: $45,000, less
25% of AMTI exceeding $150,000 (zero exemption when AMTI income is $330,000),
unmarried individuals: $33,750, less 25% of AMTI exceeding $112,500 (zero
exemption when AMTI is $247,500), and married individuals filing separately,
estates and trusts: $22,500, less 25% of AMTI exceeding $75,000. But AMTI
of married individuals filing separately must be increased by the lesser
of $22,500 or 25% of the excess of AMTI (before considering this increase)
over $165,000. In no case can the exemption amount be less than zero.
Where a child is subject to the "kiddie tax", the child's AMT exemption
amount may not exceed the child's earned income for the tax year plus
$5,000 for 1998 ($5,100 for 1999). But the exemption computed under this
limit can't be more than the child's regular AMT exemption ($33,750 before
phaseout).
AMT adjustments differ from preferences. Adjustments involve a substitution
of AMT treatment of an item for the regular tax treatment. A preference
involves the addition of the difference between the AMT treatment and
the regular tax treatment. Some (but not all) adjustments can be negative
amounts, i.e., they may result in alternative minimum taxable income that's
less than taxable income. Tax preferences can't be negative amounts.
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