According to the Internal Revenue Service, the alternative minimum tax, or AMT, applies to certain individuals with a higher income. The AMT ensures that individuals and corporations benefiting from certain deductions will pay at least the minimum allowable taxable amount.Continue Reading
Individuals only need to pay the AMT if their AMT tax amount is higher than the traditional tax amount. As stated by CNN Money, the AMT is calculated basically the same way. The only exception is that some standard deductions are not allowed when calculating the alternative minimum tax amount.
The IRS states if a person uses tax preparation software, the possibility of an AMT is automatically calculated. A professional tax preparer will also be able to determine if an individual needs to pay the alternative minimum tax. If the person is preparing his or her own taxes and is not using tax software, then it will be necessary to complete the IRS Form 6251. The IRS also offers an online AMT assistant. This allows a taxpayer to input information to see if he or she will need to pay the AMT. There are a few exceptions in which, if any apply, Form 6251 must be completed, as per IRS rules. Some examples of these exceptions are: an accelerated depreciation claimed in the current tax year, a Section 1202 exclusion, a credit for the prior year's minimum tax, a qualified electric vehicle credit and a net operating loss deduction.Learn more about Taxes