question.jpgIn Federal Income Tax

How does my alternative minimum taxable income differ from my standard taxable income?

Before you calculate your alternative minimum tax (commonly referred to as the “AMT”), you must determine your alternative minimum taxable income using Form 6251. This AMT income differs from your standard taxable income because there are certain deductions and exemptions you can take in calculating your regular tax liability which you are not allowed to use in calculating your AMT liability (and thus, your AMT income will generally be higher than your regular taxable income). For example, the standard deduction and personal exemptions are ignored when your AMT liability is determined (which is why the starting point for Form 6251 is your adjusted gross income, which is your income before any deductions or exemptions are applied). Other things which are treated differently when calculating AMT liability include: (i) income tax and sales tax payments; (ii) medical and dental expenses; (iii) miscellaneous itemized deductions; (iv) interest expenses from mortgages and home equity loans; and (v) investment interest. Once again, Form 6251 will guide through this whole process.