UNDERSTANDING THE ALTERNATIVE MINIMUM TAX
The Alternative Minimum Tax (AMT) is a parallel federal income tax system with its own set of rates and deductions. Even though it was originally created to close loopholes used by the wealthiest individuals, today many middle-class Americans owe the AMT in addition to federal income tax.
Each year when you calculate your federal income tax liability, you must also calculate your AMT liability. Under the AMT tax code, many of the deductions allowable through the ordinary income tax guidelines are excluded. Because you cannot deduct dependent credits, home equity loan interest, property taxes, and state and local income taxes paid, you have more taxable income. So if you reside in a state with high income taxes or you have more than two children, you could have AMT exposure.
2014 Alternative Minimum Tax
|Filing Status||Exemption Amount|
|Married filing jointly||$82,100|
|Married filing separately||$41,050|
How do you know if you owe the AMT?
When you file your taxes, you must fill out IRS Form 6251.
If your tax calculation on Form 6251 is higher than your IRS 1040 tax calculation, you must pay the federal income tax due from your 1040 plus the difference as AMT.
What could trigger AMT exposure?
- Large numbers of personal exemptions
- The standard deduction (if you claim it)
- Significant itemized deductions
- A large capital gain
- Exercising incentive stock options
- Accelerated depreciation
- Interest from private activity municipal bonds
- Investment expenses
- Passive income or losses
Take steps now to manage your AMT liability
Your financial advisor can show you strategies to help protect your assets by minimizing the impact of the AMT.
This material was prepared to support the promotion and marketing of investment and insurance products. Lincoln Financial Group® affiliates, their distributors, and their respective employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S. federal, state, or local tax penalties. Please consult your own independent advisor as to any tax, accounting, or legal statements made herein.
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates, including broker-dealer/distributor Lincoln Financial Distributors, Inc., Radnor, PA, and insurance company affiliates The Lincoln National Life Insurance Company, Fort Wayne, IN, and Lincoln Life & Annuity Company of New York, Syracuse, NY. Affiliates are separately responsible for their own financial and contractual obligations.