What triggers the AMT (Alternative Minimum Tax)?

Question

With AGI of $80,000 with deductions for state taxes, margin interest and my travel per diem, I triggered the AMT adding an additional $8000 to my tax bill. This tax was intended for the very wealthy, not truck drivers as I am. Why me?

Answer 1

The AMT sucks. Originally intended to prevent the wealthy from using schedule A to reduce their taxable income, it has become an albatross around the neck of the middle class. It has not been properly adjusted to keep pace with inflation. They should dump it all together.

Answer 2

Unfortunately, there's no telling for sure what will trigger the AMT for any given taxpayer. A combination of any number of factors might set it off. If you have any doubt, it's advisable to fill out IRS Form 6251 along with your regular taxes, so you can see which of the two is higher (and therefore the one you owe). Here is a list of items, or preferences, that might cause liability under the alternative minimum tax; it is not meant to be a complete list.

Exemptions. The more exemptions you claim, the more likely it is you'll have AMT liability.

Standard deduction. Although the AMT usually hits higher-income folks, this widely used deduction can contribute to AMT liability.

State and local taxes. If your state or local taxes are high, you're more likely to be subject to the AMT.

Medical expenses. If you claim an itemized deduction for medical expenses, part or all of it will be disallowed when you calculate the AMT.

Miscellaneous itemized deductions. If you claim a large number of certain itemized deductions (such as unreimbursed employee expenses, tax preparation fees, etc.), you could end up paying the AMT.

Various credits. The more credits you claim, the more likely it is you'll get hit with the alternative tax.

Incentive stock options and long-term capital gains. Exercising a large ISO is practically guaranteed to stick you with the AMT. A large capital gain reduces or eliminates the AMT exemption amount, which is meant to protect low-income earners from the alternative tax.

Interest on second mortgages. If you borrowed against your home for some purpose other than expenses related to the home, the interest deduction won't be allowed under AMT.

Tax-exempt interest. Interest otherwise exempt from the regular income tax might not be for the AMT.

Tax shelters. The AMT provides reduced tax benefits for investments in certain types of partnership or limited liability company arrangements involving activities such as drilling for gas or oil

While there may not be any dependency or personal exemptions under the AMT, you don't have to pay AMT if you meet any of the following exemptions.

$45,000 for married couples filing jointly with phase-out beginning when AMT income is over $150,000.

$33,750 for single people, or heads of households, with phase-out beginning when AMT income is over $112,500.

$22,500 for married couples filing separately with phase-out beginning when AMT income is over $75,000.

Answer 3

something doesnt sound right. I have a client w/ AGI of 137,000, six exemptions, itemized deductions of 15,000. the regular tax is 19,200 but the extra AMT tax is only 260. did you do the taxes yourself, use software, or have someone do them? I'd give your situation a second look. I have many clients w/ AGI in the
60k to 90k range and none of them get hit with AMT.

Answer 4

NEVER believe the STATED intent of ANY legislation. The AMT was intended to increase taxes without appearing to increase taxes. PERIOD. It does so by removing certain deductions. By the way, WEALTH and INCOME are NOT the same. $80,000 IS double the median income. According to congress, you ARE wealthy.