Line 2a: Standard deduction or deductible taxes from Schedule A: In calculating the AMT, you cannot take itemized deductions for state and local income tax, real estate taxes and personal property taxes, even though these are deductible on your regular return. Line 1: Taxable income: This line is the amount shown on line 15 of your 1040, which is your taxable income.Īdjustable Gross Income (AGI) minus your standard or itemized deductions (some of which are added back in on the following lines) and Qualified Business Income (QBI) is your Taxable Income. Wherever we see a tax-planning opportunity, we will suggest how to lessen the impact of the AMT. We'll walk through Form 6251, line by line, looking at how the AMT handles different deductions and expenses. To avoid the AMT, you need to understand how the AMT differs from the regular tax system. One of the best things that can be said about the AMT is that Congress was successful in making it difficult to get around this tax. For instance, you have to put various items back into your income, adding such items as your standard deduction, taxes deducted on Schedule A, the bargain element of any incentive stock options you exercised, as well as several investment related items. Look for entries on lines 2 and 3, which adjust your taxable income for AMT purposes.Compare the Tentative Minimum Tax to your regular tax (Tentative Minimum Tax should be the line above your regular tax) to see how close you were to paying the AMT.The simplest way to see why you are paying the AMT, or how close you came to paying it, is to look at your Form 6251 from last year. It can result in you paying hundreds or even thousands of dollars in additional taxes. If the tax calculated on Form 6251 is higher than that calculated on your regular tax return, you have to pay the difference as AMT in addition to the regularly calculated income tax.To figure out whether you owe any additional tax under the Alternative Minimum Tax system, you need to fill out Form 6251.The AMT is a parallel tax system that operates in the shadow of the regular tax system, expanding the amount of income that is taxed by adding items that are not normally taxed and disallowing many deductions under the regular tax system. The AMT exemption amounts are now indexed to rise with inflation. But because the AMT was never indexed to inflation-as the regular income tax is-each year, more and more taxpayers that weren't originally targeted are snared by a tax originally focused on the rich. So Congress instituted the AMT with the aim of making the tax system fairer. Their nonexistent tax bills were an embarrassment. In addition, we provide links to specific current and prior year Internal Revenue Service (IRS) forms and publications to help you compute your New York itemized deductions.In 1969, Congress noticed that 155 people with high incomes were legally using so many deductions and other tax breaks that they were paying absolutely nothing in federal income taxes. We briefly describe the difference between federal and New York State itemized deduction rules below. For certain New York itemized deduction computations, the instructions for Form IT-196 may refer you to this webpage for additional information or instruction. New York State itemized deductions are reported on Form IT-196, New York Resident, Nonresident, and Part-Year Resident Itemized Deductions. In general, your New York itemized deductions are computed using the federal rules as they existed prior to the changes made to the Internal Revenue Code (IRC) by the Tax Cuts and Jobs Act (Public Law 115-97). See TSB-M-18(6)I, New York State Decouples from Certain Personal Income Tax Internal Revenue Code (IRC) Changes for 2018 and after, for more information on this change. Beginning with tax year 2018, the Tax Law allows you to itemize your deductions for New York State income tax purposes whether or not you itemized your deductions on your federal income tax return.
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