What is ATM in calculating Income Tax?

Question

I made $177,000 last year. I don't have a mortgage and my total itemized deductions were about $9600. I use Turbo Tax. I paid in about $27k in tax and Turbo Tax says I owe about $7k more because of ATM. It won't even let me take my two kids are expemptions.

Answer 1

you mean amt? alternative minimum tax

Answer 2

The alternative minimum tax is a an alternative tax system originally designed to stop the wealthy from avoiding income taxes. Under AMT, you start with a higher amount of income that is not subject to tax, but you don't get a lot of the deductions that you would qualify for under the basic income tax law.

Because the AMT was never indexed for inflation, more and more people who would consider themselves to be in the middle class are finding themselves to be subject to this tax. Congress is reluctant to address this issue because they need the money and because people are not complaining loudly enough.

If you think you may be subject to AMT in a given year but not in a subsequent year, or vice versa, there may be tax planning opportunities that you could take advantage of. The idea would be to push certain deductions such as property tax payments into years in which your income is lower. Since you would not be able to benefit from these deductions in the AMT year, you would be better off getting these deductions in the other year.

Answer 3

You mean AMT - alternative minimum tax.

It's an alternative tax method that kicks in when you cross certain thresholds. It's designed to make sure the wealthy pay their fair share. Unfortunately average incomes are rising to the point where AMT kicks in for a lot of people. Suggest you read the fine print, possibly call for help at TurboTax. You may have a way around it.

Answer 4

It's AMT, not ATM, and stands for Alternative Minimum Tax. Most deductions are not allowed under the tax. There are two brackets, 26% and 28%. You'll be mostly in the 26% bracket as the 28% bracket starts at $175K. http://www.smartmoney.com/tax/filing/index.cfm?story=amt has more info.

Answer 5

Alternative Mininum Tax is AMT. You mush have some preferentially treated income such as long term capital gains. It is not just itemized deductions that count.

Answer 6

You are describing "AMT, " or Alternative Minimum Tax. When your taxable income reaches a certain level, form 6251 is used to remove certain deductions and to recalculate your tax.

At your income level you are definitely subject to ATM.