The alternative minimum tax AMT is a supplemental income tax imposed by the United States federal government required in addition to baseline income tax for certain individuals, corporationsestatesand trusts that have exemptions or special circumstances allowing for lower payments of standard income tax. AMT is imposed at a nearly flat rate on an adjusted amount of taxable income above a certain threshold also known as exemption. This exemption is substantially higher than the exemption from regular income tax. Regular taxable income is adjusted for certain items computed differently for AMT, such as depreciation and medical expenses. No deduction is allowed for state taxes or miscellaneous itemized deductions in computing AMT income. Taxpayers with incomes above the exemption whose regular Federal income tax is below the amount of AMT must pay the higher AMT stock. A predecessor "minimum tax", enacted inimposed an additional tax on certain tax benefits for certain taxpayers. The present AMT was enacted in and limits tax benefits from a variety of deductions. On January 2,President Barack Obama signed the American Taxpayer Relief Act ofwhich indexes to inflation the income thresholds for being subject to the tax. Each year amt taxpayer must calculate and then pay the greater of an alternative minimum tax AMT or regular tax. This is then paid in arrears from the normal payroll income tax less any allowable deductions. As with regular federal income tax, rates and exemptions vary by filing status. A lower rate applies on capital gains and qualifying dividends. To the extent AMT exceeds regular Federal income tax, a future credit is provided which can offset future regular tax to the extent AMT does not apply in a future year. However, this credit is limited: Regular tax used as a basis for computing AMT is found on the following lines of tax return forms: Under the AMT, no deduction is allowed for personal exemptions other than the AMT specific exemption, which is larger than the personal exemption except for high income taxpayersnor is the standard deduction. However, most other itemized deductions apply at least in part. Significant other adjustments to income and deductions apply. Individuals must file IRS Form and corporations must file Form if they have any net AMT due. The form is also filed to claim the credit for prior year AMT. Options individual adjustments in computing AMT include: Many AMT adjustments apply to businesses operated by individuals or corporations. Certain other adjustments apply. Corporations are also subject to an adjustment up or down for adjusted current earnings. AMT is reduced by a foreign tax creditlimited based on AMT income rather than regular taxable income. A predecessor "minimum tax" was enacted by the Tax Reform Act of [16] and went into effect in Treasury Secretary Joseph Barr prompted the enactment action with an announcement that high-income households had not paid a dime of federal income taxes. The explanation of the Act prepared by Congress's Staff of the Joint Committee on Internal Revenue Taxation described the reason for the AMT as follows:. As a result, there were large variations in the tax burdens placed tax individuals or corporations with similar economic incomes, depending upon the size of their preference income. In general, those individual or corporate taxpayers who received the bulk of their income from personal services or manufacturing were taxed at relatively higher tax rates than others. On the other hand, individuals or corporations which received the bulk of their income from such sources as capital gains or were in a position to benefit from net lease arrangements, from accelerated depreciation on real estate, from percentage depletion, or from other tax-preferred activities tended to pay relatively low rates of tax. In fact, many individuals with high incomes who could benefit from these provisions paid lower effective rates of tax than many individuals with modest incomes. In extreme cases, individuals enjoyed large economic incomes without paying any tax at all. Similarly, a number of large corporations paid either no tax at all or taxes which represented very low effective rates. The AMT has undergone several changes since The most significant of those, according to the Joint Committee on Taxation, occurred under the Reagan era Tax Equity and Fiscal Responsibility Act of The current structure of the AMT reflects changes that were made by the law. However both participation and revenues from the AMT temporarily plummeted after the changes. For years since then, Congress had passed one-year "patches" aimed at minimizing the impact of the tax. While not automatically indexed for inflation until a change in the law in earlythe exemption had been increased by Congress many times. In addition, the tax rate was increased for individuals effective andand the tax was limited for capital gains and qualifying dividends in For the tax year, the patch was passed on December 20,but only after the IRS had already designed its forms for The IRS had to reprogram its forms to accommodate the law change. Alternative minimum tax AMT [30] is imposed on an alternative, more comprehensive measure of income than regular federal income tax. Conceptually, it is imposed instead of, rather than in addition to, regular tax. AMT is imposed if the tentative minimum tax exceeds the regular tax. Regular tax is the regular income tax reduced only by the foreign and possessions tax credits. This credit may not reduce regular tax below the tentative minimum tax. Alternative minimum taxable income is regular taxable income, plus or minus certain adjustments, plus tax preference items, less the allowable exemption as phased out. Individuals, C corporations, estates, and trusts are subject to AMT. Partnerships and S corporations are generally not subject to income or AMT taxes, [32] but, instead, pass-through the income and items related to computing AMT to their partners and shareholders. The rate of AMT varies by type of taxpayer. The deduction for personal exemptions is not allowed. Instead, all taxpayers are options an exemption that is phased out at higher income levels. Due to the phase-out of exemptions, the actual marginal tax rate 1. The Married Filing Separately MFS phase-out does not stop when the exemption reaches zero, either in or This is because the MFS exemption is half of the joint exemption, but the phase-out is the full amount, so for MFS filers the phase-out amount can be up to twice the exemption amount, resulting in a 'negative exemption'. This prevents a married couple with dissimilar incomes from benefiting by filing separate returns so that the lower earner gets the benefit of some exemption amount that would be phased out if they filed jointly. When filing separately, each spouse options effect not only has their own exemption phased out, but is also taxed on a second exemption too, on the presumption that the other spouse could be claiming that on their own separate MFS return. Small corporations are exempt from AMT. Once a corporation ceases to be a small corporation for AMT, it is never again a small corporation. This limit is applied to all members tax an affiliated group as if they were a single corporation. All taxpayers claiming deductions for depreciation must adjust those deductions in computing AMT income to the amount of deduction allowed for AMT. When a taxpayer is required to recognize gain or loss on disposal of a depreciable asset or tax control facilitythe gain or loss must be adjusted to reflect the AMT depreciation amount rather than regular depreciation amounts. For more details on these calculations, see MACRS. In addition, corporate taxpayers may be required to make adjustments to depreciation deductions in computing the adjusted current earnings ACE adjustment. Individuals are not allowed certain deductions in computing AMT that are allowed for regular tax. The phase-out of itemized deductions does not apply. No deduction is allowed for state, local, or foreign income or property taxes. A recovery of such taxes is excluded from AMTI. No deduction is allowed for most miscellaneous itemized deductions. Interest expense deductions for individuals may be adjusted. This includes interest resulting from refinancing such debt. In addition, investment interest expense is deductible for AMT only to the extent of adjusted net investment income. Other non-business interest is generally not deductible for AMT. An adjustment is also incentive for qualified incentive stock options and stock received under employee stock purchase plans. Circulation and research expenses must be capitalized and amortized. Corporations are required to make an adjustment based on adjusted current earnings ACE. ACE is AMTI further adjusted for certain items. These include further depreciation adjustments for most assets, adjustments to more closely reflect earnings and profits, cost rather than percentage depletion, LIFO, charitable contributions, and certain other items. The deduction for net operating losses is adjusted to be based on losses for AMTI. Farm losses are limited for AMT purposes. Passive activity losses are recomputed for AMT purposes based on income and deductions as recomputed for AMT. Certain adjustments apply with respect to farm and passive activity loss rules for insolvent taxpayers. All taxpayers must add back tax preference deductions in computing AMTI. Taxpayers may elect an optional year write-off of certain tax preference items in lieu of the preference add-back. Note that in prior years there were certain other tax preference items relating to provisions now repealed. Credits are allowed against AMT for foreign taxes [50] and certain specified business credits. Tax AMT foreign tax credit limitation is redetermined based on AMTI rather than regular taxable income. Thus, all adjustments and tax preference items above must be applied in computing the AMT foreign tax credit limitation. After a taxpayer has paid AMT, a credit is allowed against regular tax in future years for the amount of AMT. Taxpayers may use a simplified method under which the AMT foreign tax credit limit is computed proportionately to the regular tax foreign tax credit limit. IRS Form is used to claim this credit. The alternative minimum tax may apply to individuals exercising stock options. Under AMT rules, for incentive stock options at the time of exercise, the "bargain element" or "spread price" the difference between the strike price and fair market value is treated as an AMT adjustment, and therefore needs to be added to the AMT calculation even though no ordinary income tax is due at the time of exercise. In contrast, under the regular tax rules capital gains taxes are not paid until the actual shares stock stock are sold. The AMT was designed to prevent people from using loopholes in amt tax law to avoid tax. However, the inclusion of unrealized gain on incentive stock options imposes difficulties for people who cannot come up with cash to pay tax on gains that they have not realized yet. As a result, Congress has taken action to modify the AMT regarding incentive stock options. In andpeople exercised incentive stock options and held onto the shares, hoping to pay long-term capital gains taxes instead of short-term capital gains taxes. In the Nortel example given above, the individual would receive a credit for the AMT paid when the individual did eventually sell the Nortel shares. However, given the way AMT carryover amounts are recalculated each year, the eventual credit received is in many cases less than originally paid. In the Nortel example above, the taxpayer could have avoided problems by selling sufficient stock to cover the AMT liability immediately upon exercising the stock options. However, AMT also applies to stock options in pre-IPO or privately held companies: In such a case, it may be effectively impossible for the employee to exercise the option unless he or she has enough cash with which to pay the AMT. Although the AMT was originally enacted to target high-income households, it now affects millions of families each year. The number of households that pay the tax has increased significantly in the last decade: Infor example,taxpayers paid the AMT; [55] bythe number of stock taxpayers jumped to 3. The primary reason for AMT growth is the fact that the AMT exemption, unlike regular income tax items, was not indexed to inflation before This means that income thresholds did not keep pace with the cost of living. While not indexed for inflation, Congress often passed short-term increases in exemption amounts. The Tax Policy Center a research group estimated that if the AMT had been indexed to inflation inand if the Bush tax cuts had not gone into effect, onlytaxpayers—instead of their projected 27 million—would be subject to the tax in Another important reason for the recent expansion of the AMT is the effect of the — Bush tax cuts. The lower tax liabilities triggered AMT eligibility for many households. Economists often refer to this as the "take-back effect" of the Bush tax cuts. As the AMT has expanded, the inequalities created by the structure of the tax have become more apparent. Taxpayers are not allowed to deduct state and local taxes in calculating their AMT liability; as a result, taxpayers who live in states with high income tax rates are up to 7 times more likely to pay the AMT than those who live in states with lower income tax rates. The AMT rate has not been changed at the same times as regular income tax rates. The tax cut passed in lowered regular tax ratesbut did not lower AMT rates. As a result, certain people are affected by the AMT who were not the intended targets of the laws. People with large deductions, particularly those resident in states or cities with high income tax rates, or those with nonqualifying mortgage interest deductions, are most affected. The AMT also has the potential to tax families with large numbers of dependents usually childrenalthough in recent years, Congress has acted to keep deductions for dependents, especially children, from triggering the AMT. Because the AMT was not indexed to inflation untiland because of recent tax cuts, [18] [62] an increasing number of middle-income taxpayers have options finding themselves subject to this tax. The lack of indexing produces bracket creep. The recent tax cuts in the regular tax have the effect of causing many taxpayers to pay some AMT, reducing or eliminating the benefit from the reduction in regular rates. In all such cases, however, the overall tax payable will not increase. Inthe IRS's National Taxpayer Advocate's report highlighted the Stock as the single most serious problem with the tax code. The Advocate noted that the AMT punishes taxpayers for having children or living in a high-tax state and that the complexity of the AMT leads to most taxpayers who owe AMT not realizing it until preparing their returns or being notified by the IRS. However, CBO's rules [66] state that it must use current law in its analysis, and at the time the above text was written, the AMT threshold was set to expire in and be reset to far lower values. At the same time it removed and revised some of the exotic investment deductions. A law for untaxed rich investors was refocused on families who own their homes in high tax states. A further shift, involving many definitional changes and extensive reorganization, occurred with the Tax Reform Act of A further criticism is that the AMT does not even affect its intended target. Congress introduced the AMT after it was discovered that 21 millionaires did not pay any US income tax in as a result of various deductions taken on their income tax return. Since the marginal rate of persons with one million dollars of income is Determining whether one is subject to the AMT can be difficult. According to the IRS's taxpayer advocate, determining whether someone owes the AMT can require reading 9 pages of instructions, and completing a line worksheet and a line form. However, taxpayers must also perform all of the paperwork for a regular tax return and then all of the paperwork for Form Furthermore, affected taxpayers may have to calculate AMT versions of all carryforwards since the AMT carryforwards may be different than regular tax carryforwards. Once a taxpayer qualifies for AMT, he or she may have to calculate AMT versions of carryforward losses and AMT carryforward credits until they are used up in future years. The definitions of taxable income, deductible expenses, and exemptions differ on Form from those on Form The complexity of the AMT paired with the history of last minute annual patches adjusting the law create tax liability uncertainty for taxpayers. For the last ten years, Congress has passed one-year patches to mitigate negative effects, but they are typically passed close to the end of the year. This makes it difficult for taxpayers to determine their tax liability ahead of time. In addition, because the AMT was not indexed for inflation untilthe cost of annual patches rises every year. The AMT's former lack of indexation was widely conceded across the political spectrum as a flaw. That percentage was set to incentive quickly over the coming years if no changes had been made, most notably indexing for inflation. That was set to change in only a few years, however, if the AMT had remained unindexed. Because those are the households generally required to compute the AMT though only a fraction currently have to paysome argue that the AMT still hits only the wealthy or the upper middle class. The cost-of-living index is generally higher in such areas, which leads to families who are "middle class" in that area having to pay the AMT, while in poorer locales with lower costs of living, only the "locally wealthy" pay the AMT. In other words, many who pay the AMT have incomes that would place them among the wealthy when considering the United States as a whole, but who think of themselves as "middle class" because of the cost of living in their locale. As early as the first Tax Reform study inarguments were made for eliminating the deduction for state and local taxes:. When taxpayers acquire similar incentive by private purchase for example, when taxpayers pay for water or sewer servicesno deduction is allowed for the expenditure. Allowing a deduction for State and local taxes simply permits taxpayers to finance personal consumption expenditures with pre-tax dollars. Proponents of eliminating the state and local tax deduction lost out in the Tax Reform, but they won a concession by eliminating these deductions in the AMT computation. That, coupled with the non-indexation of the AMT, created a slow-motion repeal of the deduction for state and local income taxes. The AMT's partial disallowance of the foreign tax credit disadvantages even low-paid American citizens and green card holders who work abroad or who are otherwise paid in foreign currency. Particularly as the dollar falls around the world, those working abroad see their incomes when reported to the IRS in terms of US dollars skyrocket, even if their actual incomes fall from year to year, and even if their foreign tax liabilities increase. They are in effect being taxed solely on changes in exchange rates, from which they do not benefit because their household expenses are all in foreign currency. They reduce tax liability by the options tentative minimum tax effective marginal rate of While many parties agree that the AMT needs to be changed, some argue against its outright repeal. Policy analysts are divided over the best way to address the criticisms of the AMT. Len Burman and Greg Leiserson of The Tax Policy Center, a joint program of the Urban Institute and Brookings Institutionhave proposed a revenue-neutral, highly progressive replacement for the AMT. The thresholds would be indexed for inflation after Other groups advocate repealing the AMT rather than attempting to reform it. One such group, the Cato Institutenotes that:. The right-leaning National Taxpayers Union also supports repeal. The conservative-leaning Tax Foundation says that the AMT could be effectively repealed simply by correcting the deficiencies in the regular tax code. Economist Patrick Fleenor argues that "it is usually the unjustifiable limitations on taxable income…that cause the AMT backstop to kick in. If income were taxed comprehensively by the regular tax code, there would be no way of legally avoiding taxation, and not one taxpayer would have to file the AMT form even if the law were still on the books. Some have proposed abolishing the regular tax and modifying and indexing the AMT. From Wikipedia, the free encyclopedia. Alternative minimum tax Capital gains tax Corporate tax Estate tax Excise tax Gift tax Income tax Payroll tax Internal Revenue Service IRS Internal Revenue Code IRC IRS tax forms Revenue by state History Constitutional authority Taxpayer standing Court Protest Evasion. State and local taxation. State income tax Property tax Sales tax Use tax Land value tax State tax levels. Automated payment transaction tax 9—9—9 Competitive Tax Plan Efficient Taxation of Income FairTax Flat tax Hall—Rabushka flat tax Kemp Commission Taxpayer Choice Act USA Tax Value added tax Border-adjustment tax. Also see IRS Form individuals and Form corporations. For a table of AMT Adjustments, see, e. These credits include the credits for alcohol used as fuel, low income housing, work opportunity, empowerment zone, renewable electricity, FICA tip, rehabilitation, and energy. Retrieved April 23, Retrieved January 31, Harris, "The Individual AMT: Problems and Potential Solutions". Urban Institute and Brookings Institution, September Archived PDF from the original on September 6, Retrieved September 4, Archived from the original on January 21, Retrieved January 15, The New York Times. The IRS has not issued a publication on alternative minimum tax, but provides details in instructions to individual Form and corporate Form The IRS also has a web-based calculator, Alternative Minimum Tax AMT Assistant for Individualsavailable for recent tax years. An S corporation may be subject to tax on "built-in gains" if it was converted from a C corporation. Income taxed under these sections is excluded from the normal definition of gross income, and thus from AMT. See 26 USC and 26 USC Also see page 53 for certain totals. Note that many tax preferences reduce adjusted gross income and increase AMT. The Individual Alternative Minimum Tax AMT: Testimony Before the Subcommittee on Select Revenue Measures of the House Committee on Ways and Means, March 07, Tax PDF from the original on June 25, Retrieved July 22, Archived PDF from the original on October 10, Retrieved September 6, Unraveling the Alternative Minimum Tax". Retrieved September 21, Retrieved November 17, Archived PDF from the original on June 14, Retrieved May 30, Historical Data and Projections" PDF. Stock PDF amt the original on September 10, Retrieved July 29, Retrieved September 24, The Treasury Department Report to the Amt. General Explanation of the Treasury Department Proposals. Office of the Secretary, Department of the Treasury. Archived from the original on June 17, Retrieved April 11, Retrieved December 12, Archived PDF from the original on February 26, Retrieved February 27, Archived PDF from the original on February 24, Center on Budgetary and Policy Priorities. Archived from the original on June 27, Retrieved September 5, Archived from the original on June 3, Retrieved June 27, Repeal, Not Reform" PDF. Archived PDF from the original on June 12, No Alternative But Repeal". Archived from the original on May 23, Archived PDF from the original on August 10, Archived from the original on January 9, Retrieved January 10, Retrieved from " https: Personal taxes in the United States. Webarchive template wayback links CS1 maint: Unfit url Articles with obsolete information from January All Wikipedia articles in need of updating Use mdy dates from August Navigation menu Personal tools Not logged in Talk Contributions Create account Log in. Views Read Edit View history. Navigation Main page Contents Featured content Current events Random article Donate to Wikipedia Wikipedia store. Interaction Help About Wikipedia Community portal Recent changes Contact page. Tools What links here Amt changes Upload file Special pages Permanent link Page information Wikidata item Cite this page. This page was last edited on 3 Juneat Text is available under the Creative Commons Attribution-ShareAlike License ; additional terms may apply. By using this site, you agree to the Terms of Use and Privacy Policy. Privacy policy About Wikipedia Disclaimers Contact Wikipedia Developers Cookie statement Mobile view. This article's factual accuracy may be compromised due to out-of-date information. Please update this article to reflect recent events or newly available information. This article is part of a series on. Federal taxation Alternative minimum tax Capital gains tax Corporate tax Estate tax Excise tax Gift tax Income tax Payroll tax Internal Revenue Service IRS Internal Revenue Code IRC IRS tax forms Revenue by state History Incentive authority Taxpayer standing Court Protest Evasion. State and local taxation State income tax Property tax Sales tax Use tax Land value tax State incentive levels. Federal tax reform Automated payment transaction tax 9—9—9 Competitive Tax Plan Efficient Taxation of Income FairTax Flat tax Hall—Rabushka flat tax Kemp Commission Taxpayer Choice Act USA Tax Value added tax Border-adjustment tax.
Thanks to the background I have experienced, having plenty of vegetables in meal or going outdoor physical activities have become normal in my daily life.
Thanks to the background I have experienced, having plenty of vegetables in meal or going outdoor physical activities have become normal in my daily life.
Emerging environmentalists work in groups and pretend that each is a power company generating electricity for a community.
Type 2 diabetics produce insulin but the target cells for insulin fail to respond, therefore blood glucose.