Alternative Minimum Tax (AMT) Credit

The number of taxpayers affected by the Alternative Minimum Tax (AMT) is expected to exceed 30 million in 2010. As the name implies, the AMT is an alternative to your regular tax, and was initially designed to ensure that wealthy Americans did not avoid paying federal income tax—you pay whichever amount is more, your regular tax or the AMT. For 2010, the AMT exemption amount is:

• $47,450 for Single and Head of Household filers
• $72,450 for Married Filing Jointly and Qualifying Widow(er)s
• $36,225 for Married Filing Separately

While income within these amounts is exempt from the AMT, income exceeding these exemption amounts may be subject to AMT, under one of two tax rates:

• 26% on the first $175,000 of AMT taxable income
• 28% on the remainder of the AMT taxable income

Because inflation has made more and more taxpayers affected by the AMT, Congress creates AMT "patches" that increase the exemption amount. If you were subject to the AMT in a prior year and you're not subject to the AMT this year, you may be eligible to claim the minimum tax credit.

Laws on this topic may vary from state to state. This content is not meant to provide you with complete information and it is not intended to be legal or tax advice. It is recommended that you consult with your own attorney, accountant or other advisor regarding your specific situation.