AMT Rates and Exemptions
The alternative minimum tax (AMT) method does provide each taxpayer with a flat dollar amount that is completely exempt from tax. The dollar amount of your exemption depends on your filing status. The exemption amounts for 2001 through 2004 are:
- $49,000 if married filing jointly
- $35,750 if single or head of household
- $24,500 if married filing separately
Although the exemption amounts have finally increased since 1992, the AMT rates remain the same for 2001 and beyond. If your taxable income for AMT purposes (called AMTI) exceeds the exemption amount, you will be subject to a 26 percent AMT rate on the first $175,000 of AMTI that exceeds the exemption amount, and a 28 percent rate on any AMTI above this $175,000 amount.
The AMT exemption amounts are phased out for taxpayers having AMTI exceeding the specified income levels. Under these rules, the exemption available to married couples filing jointly is eliminated entirely if AMTI exceeds $346,000. The amount where the exemption is reduced to zero is $255,500 for single individuals and heads of households, and $173,000 for married taxpayers filing separately.
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There's no doubt about it — the AMT can play havoc with your tax planning. If your AMT liability and your regular tax liability tend to be approximately equal from year to year, your best bet is to maintain this stability. If your deductions are not so evenly spaced and you tend to have great fluctuations in income from year to year, you may be able to shift some AMT-triggering items from an AMT year to a non-AMT year, so as to reduce your liability in a non-AMT year almost to the point at which you would become subject to the AMT. Your tax professional can tell you whether this might be possible in your individual situation.
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