Alternative Minimum Tax Introduction

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Discussion
A second methodology for calculating income tax exists and is applicable to taxpayers with income above a certain level with a different set of rules. This second methodology is called the Alternative Minimum Tax (AMT). Taxpayers above that threshold are required to calculate their tax liability under both methodologies and pay a tax on the higher of the two amounts. First, the 2017 exemption amounts:

1. Single - $54,300;
2. Married filing jointly - $84,500;
3. Married filing separately - $42,250; and
4. Head of household - $54,300.

Some of the key differences between the AMT and the regular method for calculating taxable income include:

1. A different tax rate;
2. The standard deduction is not available when calculating the AMT liability (itemized deductions only);
3. Different ways of calculating certain itemized deductions under the AMT;
4. A different way of calculating depreciation expense (potentially) and net operating loss carryforwards/carrybacks;
5. Different ways of calculating certain business expenses; and
6. The limitation of certain tax credits.

Disclaimer
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.