Ever heard of the Alternative Minimum Tax (AMT)? If not, that's most likely because you have never had to pay the tax.
The original intent of this tax was to keep those who earn high incomes from using loopholes in the tax laws in order to avoid paying their fair share of taxes through the use of manuy write-offs and deductions.
Basically, the tax requires tax payers to calculate their income under the regular tax system and under the AMT rules and then pay whichever tax owed that is higher.
Over the years, the tax has started to hit the upper middle class since the AMT rules have not adjusted with inflation like the rest of the tax code. Recently, Congress has passed temporary legislation to increase the income threshold for the AMT.
So, with all of that being said...who pays it? You may be subject to the AMT if your income falls between $150K and $750K per year. But- there are criteria that increase your chances of being subject to the tax:
- High gross income relative to taxable income
- Large number of dependents
- You exercise and/or hold incentive stock options
- You realize significant long-term capital gains
- You have large deductions on schedule A
If you're not sure if the AMT applies to you, work with an experienced Denver tax preparer and Denver accountant - Bloch, Rothman & Associates. We will help you navigatve through the often times confusing aspects of this tax and can assist in helping you strategize ways to minimize your exposure with the AMT. Depending on your income, there is an AMT exemption and even an AMT credit. Just another reason why working with an experienced Denver accountant can benefit you in this particular matter.
Additionally, the IRS has a tool to help you find out before tax time if you can expect to pay the AMT. You can check it out here.