Alternative Minimum Tax - AMT

The AMT provides an alternative set of rules used to calculate your income tax. According to the IRS, these rules determine the minimum amount of income tax that a person at a certain income level should be required to pay. If your regular tax liability falls below this alternative minimum amount, you will have to pay AMT to make up the difference.

Find out what kind of income is taxable.

Why Is There an Alternative Minimum Tax?

The Alternative Minimum Tax is a parallel tax system that was created by Congress as part of the Tax Reform Act of 1969. The original purpose of the AMT was to target a small number of high-income taxpayers who could claim so many credits and deductions that they ended up owing little or no income tax. The AMT was intended to keep the tax system as fair as possible and to ensure that all Americans paid at least a minimum amount of income taxes.

Who Must Pay the Alternative Minimum Tax?

The problem with the AMT is that it is not indexed for inflation. Now a growing number of middle-income taxpayers are discovering that they are subject to the Alternative Minimum Tax. Each year, Congress "patches" the AMT by raising the exemption amounts so the tax does not hit too many taxpayers too hard.

You might have to pay some AMT if your adjusted income is greater than the AMT exemption amount for your filing status.

AMT Exemption Amounts

For Tax Year 2011, the amount of one's adjusted income that is above the following exemption amounts may be subject to the Alternative Minimum Tax:

• $48,450 for Single and Head of Household
• $74,450 for Married Filing Jointly and Qualifying Widow(er)
• $37,225 for Married Filing Separately

Additionally, the AMT exemption amount for a child whose unearned income is taxed at their parent's rate is $6,700.

Alternative Minimum Tax Rates

Income that is subject to the Alternative Minimum Tax will be taxed at a rate of 26% for the first $175,000 of AMT taxable income, and at a rate of 28% for any amount of AMT taxable income above $175,000.

How the AMT Works

The Alternative Minimum Tax rules require taxpayers to calculate their tax liability the normal way, and then to calculate it again based on the AMT rules, which allow fewer deductions. Any amount of income over the applicable AMT exemption amount may be taxed at the AMT rates. Using efile is a great way to make dealing with the AMT much easier. The efile.com online software will perform all the required calculations for you.

If You Have to Pay Alternative Minimum Tax

Don't worry! eFile is a great option for everyone, especially taxpayers impacted by the AMT. The efile.com tax software will determine if you are subject to the AMT, and will select the appropriate forms for your tax return. Plus, efiling gets your refund to you faster, and also greatly reduces the chances of making an error on the AMT or other tax calculations.

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