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The Alternative minimum Tax:

Lawrence BLau & Associates, LLC income tax services

The Alternative Minimum Tax

Approximately 45 years ago, the AMT was introduced into the tax law.  The AMT was originally intended for taxpayers who paid very little or no income tax. However, the government has never fully adjusted the AMT exclusion for inflation and, as the years went on, more and more taxpayers became subject to the AMT.
 

How is it calculated? You first calculate your regular tax and then your AMT tax and then use the higher of the two amounts. Many of your tax deductions are eliminated under the AMT even though the tax rate falls to a little bit less than 28% after the AMT exclusion.

What itemized deductions are eliminated? This question is better answered by explaining what is allowable. Only contributions and mortgage interest are allowed subject to limitations. Furthermore, your personal exemptions are not incorporated into the calculation.

The exclusion for a single individual is $53,600 and $83,600 for a joint return. The exclusions are fazed out after $119,200 for a single taxpayer and $158,900 for a joint return.

Currently, if the ratio of your disallowed deductions, under the AMT, over your total income is high, then you could be subject to the AMT. Once you fall under the AMT, the only way out of it, besides lowering your disallowed deductions, is to dramatically increase your income so that the ratio gets smaller. For many taxpayers, this is nearly impossible. Please contact us at info@LawrenceBlau.com for a further explanation and guidance.

LAWRENCE BLAU & ASSOCIATES, LLC TAX SERVICES, ACCOUNTING AND FINANCIAL ADVISORY SERVICES IN OSSINING, WESTCHESTER NY

LAWRENCE BLAU & ASSOCIATES, LLC TAX SERVICES, ACCOUNTING AND FINANCIAL ADVISORY SERVICES