Wednesday, February 6, 2013

AMT = Additional Mandatory Tax

It's that time of year again when we all start calculating out our tax return here in the US.  I've discovered there is some confusion about the AMT.  AMT stands for "Alternative Minimum Tax" but that name can confuse folks.  AMT would be less confusing if it stood for "Additional Mandatory Tax."

AMT is NOT an "alternative" tax in that it is NOT an "option."  The AMT is an "additional" tax added to your federal tax for some tax payers that earn more than a certain threshold and have Itemized Deductions that are deemed too large.  That is when the AMT kicks in to force these unlucky tax payers to pay a higher amount of federal tax.  The threshold where you might be subject to AMT is $78,750 for married couples and $50,600 for individuals.

I've discovered many folks believe the Alternative Minimum Tax is an alternative way to calculate tax and that the tax payer could "choose" to pay either the normal way or the "alternative" method.  AMT is NOT an option.  The AMT is mandatory.  Thus, when you see AMT, think Additional Mandatory Tax.

Click here to learn more about AMT on the Internal Revenue Service website

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