You may not know about the Alternative Minimum Tax (AMT) because you've never had to pay it before. However, your income may have changed and you may be required to pay it when you file your 2016 tax return next year. The AMT is an income tax imposed at nearly a flat rate on an adjusted amount of taxable income above a certain threshold. If you have a higher income, you may be subject to the AMT.
Here are five facts you should know about the AMT:
1. Know when the AMT applies. You may have to pay the AMT if your taxable income, plus certain adjustments, is more than your AMT exemption amount. Your filing status and income define the amount of your exemption. In most cases, if your income is below this amount, you will not owe the AMT.
2. Know exemption amounts. The 2016 AMT exemption amounts are:
- $53,900 if you are Single or Head of Household.
- $83,800 if you are Married Filing Jointly or Qualifying Widow(er).
- $41,900 if you are Married Filing Separately.
You will reduce your AMT exemption if your income is more than a certain amount.
3. Use a qualified tax professional. Keep in mind that the AMT rules are complex. The best way to prepare and file your tax return is to use a qualified tax professional.
4. AMT Assistant Tool. Use the AMT Assistant tool on the IRS website to quickly find out if you will need to pay the tax.
5. Use the right forms. Usually, if you owe the AMT, you must file Form 6251, Alternative Minimum Tax -- Individuals. Some taxpayers who owe the AMT can file Form 1040A and use the AMT Worksheet in the instructions.
Wondering if the AMT affects you this year? Give the office a call today and find out.