AMT Rates and Exemptions
The alternative minimum tax (AMT) method provides each taxpayer
with a flat dollar amount that is completely exempt from tax. The
dollar amount of your exemption depends on your filing status.
The
exemption amounts for 2014 are:
- $82,600 if married filing jointly or as a surviving spouse
- $52,800 if single or a head of household
- $41,050 if married filing separately
These amounts are indexed for inflation.
AMT
exemption phaseout. In keeping with the congressional purpose
to extract tax from high-income individuals, the AMT exclusion amount
is phased out as one's income increases. The exemption amounts are
reduced 25 percent for each $1 of the excess of AMTI over:
- $156,500 for married individuals filing a joint return,
- $117,300 for single individuals other than surviving spouses;
and
- $78,250 for married individuals filing a separate return.
Calculating the tax due. If your taxable income
for AMT purposes (called AMTI) exceeds the exemption amount, you will
be subject to a 26 percent AMT rate on the first $182,500 of AMTI
($91,250 for married taxpayers filing separately) that exceeds the
exemption amount, and a 28 percent rate on any AMTI above this $182,500
amount. This results in your tentative minimum tax.
A taxpayer's
AMT for a tax year is the excess of their tentative minimum tax over
regular tax liability. AMT must be paid in addition to the regular
tax liability and other federal taxes owed. Thus, if your tentative
minimum tax for a tax year is $75,000 while your regular tax liability
is $50,000, you must pay an AMT of $25,000 in addition to the $50,000
regular tax for a total tax liability of $75,000.
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Work Smart There's no doubt about it--the AMT
can play havoc with your tax planning. If your AMT liability and your
regular tax liability tend to be approximately equal from year to
year, your best bet is to maintain this stability. If your deductions
are not so evenly spaced and you tend to have great fluctuations in
income from year to year, you may be able to shift some AMT-triggering
items from an AMT year to a non-AMT year, so as to reduce your liability
in a non-AMT year almost to the point at which you would become subject
to the AMT. Your tax professional can tell you whether this might
be possible in your individual situation. |
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