What's your alternative minimum tax (AMT) preference? This is an extra tax some people have to pay on top of their regular income tax.
Although most may prefer to not think about the AMT, certain income and deductions, known as preference items, affect the way the tax will apply to you. Those amounts, along with others called "adjustments," are added to or subtracted from the income shown on your tax return to arrive at your AMT taxable income.
Certain bond interest that you exclude from your regular taxable income must be included when computing income for the AMT. This is a "preference item" because tax-exempt interest gets preferential treatment under ordinary federal income tax rules.
Adjustments include personal exemptions and your standard deduction. In the AMT calculation, these taxable-income reducers are not deductible. Instead, they're replaced with one flat exemption, which is generally the amount of income you can exclude from the AMT.
* For your 2013 tax return, the AMT exemption is $80,800 when you're married filing a joint return or are a surviving spouse, $51,900 when you file as single, and $40,400 if you're married and file separately. The exemption decreases once your income reaches a certain level.
* Some itemized deductions are allowed, such as charitable contributions. Others, including medical expenses and mortgage interest, are computed using less favorable rules.
Do you need assistance calculating your AMT preference or adjustments? Contact our office at (260) 497-9761 to schedule an appointment with our Tax Advisors.