From the Desk of Michael T. McCormick
Things You Should Know: AMT
You may not know about the Alternative Minimum Tax because you’ve never had to pay it before. However, your income may have changed and you may have to pay it this year. The AMT is an income tax imposed at nearly a flat rate on an adjusted amount of taxable income above a certain threshold. If you have a higher income, you may be subject to the AMT. Many of my clients whose salaries spiked in a given year get stung by this sneaky tax.
Here are a couple things you should know about the AMT:
1. Know when the AMT applies. You may have to pay the AMT if your taxable income, plus certain adjustments, is more than your AMT exemption amount. Your filing status and income define the amount of your exemption. In most cases, if your income is below this amount, you will not owe the AMT.
2. Know exemption amounts. The 2015 AMT exemption amounts are:
• $53,600 if you are Single or Head of Household.
• $83,400 if you are Married Filing Jointly or Qualifying Widow(er).
• $41,700 if you are Married Filing Separately.
You will reduce your AMT exemption if your income is more than a certain amount.
If you think you will be subject to AMT there are planning opportunities that can mitigate if not avoid the hit. Make sure your tax professional factors an AMT analysis into your yearly tax plan or give us a call to help.