Alternative minimum tax what is it does it affect you gas nozzle keeps stopping

The exemption amount for married taxpayers who file jointly was raised to $109,400 with a phaseout of $1 million. It was increased to $70,300 for single filers with a phaseout of $500,000. These exemption figures include the adjustments for inflation.

The exemption amount functions something like a standard deduction for the AMT. In lieu of all the disallowed deductions and other adjustments, taxpayers can reduce their alternative minimum tax income by the exemption amount. The alternative minimum tax is calculated on what’s left over after the exemption amount has been subtracted.

The exemption amount is reduced or phased out by 25 percent of the difference between a person’s alternative minimum tax income and the phase-out threshold amount. The phase-out is therefore completed—meaning the exemption amount is reduced to zero—when AMT income reaches four times the exemption amount plus the phase-out threshold. Calculating Your AMT Income

You could then subtract various adjustments to income to arrive at your regular taxable income, deductions that you don’t have to itemize to claim. Some common adjustments in 2018 include a portion of self-employment tax and certain retirement plan contributions. It used to be that you could also deduct any alimony you paid, but the TCJA largely eliminated this adjustment to income.

For regular income tax, you would next subtract either the standard deduction or the total of your itemized deductions from your AGI, as well as any personal exemptions you could claim, at least through 2017. The TCJA also eliminates personal exemptions beginning in 2018.

The result is your regular taxable income. This taxable income figure is the amount you’d use to look up the tax liability figures—your tax bracket—in the tax tables to find out how much you owe the IRS. Those 155 taxpayers back in the sixties managed to more or less reduce this number to zero.

But taxable income for AMT purposes does not allow the standard deduction or certain types of itemized deductions. It also doesn’t allow deductions for personal exemptions. As a practical matter, that personal exemption deduction becomes moot with the passage of the TCJA because the new tax law also eliminates this tax perk—no one can claim it regardless of income.

But otherwise, your income could jump significantly if you weren’t able to subtract all these things and the resulting number is what determines whether you have to pay the AMT because your income is over the inflation-adjusted threshold. Itemized Deductions That Are Affected

State and local taxes are now capped at $10,000 under the TCJA. While this deduction doesn’t exactly become moot, it will have less of a negative effect for some for purposes of calculating AMT—wealthy taxpayers can’t deduct more than $10,000 in any event.

Some types of income that are normally not taxable become taxable for purposes of calculating your income for the AMT. You must include the difference between the fair market value of incentive stock options and their strike price if the options are exercised and remain unsold at the end of the year. You must also include otherwise tax-exempt interest from private activity bonds.

There are just two AMT tax rates as of 2018: 26 percent and 28 percent. The "remainder amount" is subject to this tax. It’s what’s left over after constructing the tax base of alternative minimum taxable income and calculating and subtracting the exemption amount. This remainder is multiplied against the AMT tax rates.

Most tax software programs will compute the alternative minimum tax automatically, but you might want to review the actual tax form anyway to understand which income or deductions are causing AMT liability. For many taxpayers, deductions for state income tax, property tax and home equity interest and income from incentive stock options are the main causes.