Sunday, July 13, 2014
While many individuals do not look upon taxes favorably, the Alternative Minimum Tax (AMT) has a particularly beastly reputation. The original intent of the AMT was to prevent wealthy individuals from using loopholes to avoid paying their share of taxes by taking to many deductions or write-offs.
However, over the years what was once considered “high income” is now upper middle class, and the AMT has not been adjusted accordingly. Thus, earners who are not necessarily very wealthy will be hit with the tax bill.
Generally, you may be subject to the AMT if your income falls between $150,000 and $750,000. Your chances of paying the tax increase if you have a high gross income relative to your taxable income, have a large number of dependents, hold incentive stock options, and have large deductions on your Schedule A.
If you are unsure whether the AMT will apply to you, you can consult an accountant or an attorney that will help you find out before tax time, therefore you can find ways to strategize and minimize your exposure to the tax.
See Kate Ashford, How Much Do You Know About The Alternative Minimum Tax? Forbes, July 11, 2014.