married person

Business Tax

Six Facts about the Alternative Minimum Tax

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts you should know about the AMT and changes for tax year 2011.

  1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher income taxpayers who could claim so many deductions they owed little or no income tax.
  2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.
  3. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.
  4. The AMT exemption amounts are set by law for each filing status.
  5. For tax year 2011, Congress raised the AMT exemption amounts to the following levels: $74,450 for a married couple filing a joint return and qualifying widows and widowers; $48,450 for singles and heads of household; $37,225 for a married person filing separately.
  6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,800 for 2011.

If you need information about the AMT and your tax situation, please let us know.

Tax

Dependents and Exemptions: 6 Important Facts

Even though each individual tax return is different, some tax rules affect every person who may have to file a federal income tax return. These rules include dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2011 tax return.

1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,700 on your 2011 tax return.

2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.

3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the Social Security number of any dependent for whom you claim an exemption.

4. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status and any special taxes you owe.

5. If you are a dependent, you may not claim an exemption. If someone else — such as your parent — claims you as a dependent, you may not claim your personal exemption on your own tax return.

6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children.

If you need help determining who you can claim as a dependent and how much you can deduct for each exemption you claim, don’t hesitate to call. We’re here to help!

Tax

Six Facts about the Alternative Minimum Tax

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for tax year 2010.

  1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher income taxpayers who could claim so many deductions they owed little or no income tax.
  2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.
  3. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.
  4. The AMT exemption amounts are set by law for each filing status.
  5. For tax year 2010, Congress raised the AMT exemption amounts to the following levels: $72,450 for a married couple filing a joint return and qualifying widows and widowers; $47,450 for singles and heads of household; $36,225 for a married person filing separately.
  6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,700 for 2010.

If you want further information on the AMT and your tax situation, please let us know.

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