In January 2013 Congress passed a permanent patch to the AMT aligning amounts to be indexed to rise with inflation. The AMT has its own set of forms rates rules and brackets and requires taxpayers to calculate their federal income tax using this system.
The Alternative Minimum Tax may apply to you if your income is above a certain amount. Here are four facts the IRS wants you to know about the AMT:
- You may have to pay the tax if your taxable income plus certain adjustments is more than the AMT exemption amount for your filing status.
- AMT Exemption Amount for 2014 Indexed for inflation are as follows:
- $52800 for single and head of household filers
- $82100 for married people filing jointly and for qualifying widows or widowers
- $41050 for married people filing separately
How Can I Reduce the AMT?
One way to reduce AMT is to reduce your adjusted gross income (AGI). One way to do this is to make sure you’re contributing the maximum amount allowed to all employer-sponsored retirement and savings accounts.
According to Investopedia those who are self-employed and claim a home office deduction can also reduce the AMT they end up paying. The home office deduction offsets your net self-employment earnings which reduces your AGI.
Also paying real estate taxes and state and local income taxes in years that your income might fall outside the AMT range is another strategy.
Turn to the Professionals
Because calculating AMT and figuring out the best ways to plan for it is a complicated process we suggest working with tax professionals who are experienced in this subject. They can provide different scenarios for your situation and help you in maximizing your return. The first step for clients at Lindemeyer CPA is to schedule a first consultation. We get to know your situation and develop a tax plan that will work for you. Click here to get started.