TAX: Alternative Minimum Tax and Other Taxes Flashcards
The taxpayer must pay the GREATER of the regular tax or the tentative minimum tax?
True
Most people are not going to have to pay the AMT tax?
True- most Americans don’t have to pay this tax.
What is the AMT Tax Formula?
Start with: Regular Taxable Income \+/- Adjustments \+ Preferences (always increase) = AMT Income - Exception = AMT Base X Rate = Tentative Minimum Tax before Credits - Certain Credits = Tentative Minimum Tax - Regular Tax Liability = AMT (if positive)
Credits that can also reduce AMT:
- Child and dependent care credit
- Adoption credit
- Credit for the elderly and disabled
- Child tax credit
- Education credits
- IRA credit
- Foreign Tax Credit
What items are AMT Adjustments?
1) Depreciation: The AMT adjustment applies onto to MACRS 3, 5, 7, and 10 year property
FOR AMT, the 150% declining- balance has to be used rather than 200%
No AMT adjustment is required for property that is eligible to use bonus depreciation
2) Itemized Deductions:
- No deduction for allowed for TAXES
- Standard deduction is ADDED BACK
- The compensation element to the exercise data for an incentive stock option (The difference between FMV and purchase price has to be added in for AMT Tax)
3) Tax exempt interest on private activity bonds
What is the AMT Credit?
When the taxpayer has to pay AMT Tax, they receive a credit for that amount. The maximum credit could be the full amount of the AMT.
The credit can be used in future tax years in years in which there would be no AMT tax.
What items are included in self-employment tax:
Allocations to GENERAL partners (not limited)
Director Fees
Guaranteed payments
NOTE: S-Corporation distributions ARE NOT subject to self-employment tax!!!
What are the FICA taxes levied on earned income?
Social Security - 6.2%
Medicare- 1.45%
These amounts are matched by the employer
There is an additional .9% insurance tax on certain tax holders, what is the thresholds?
Joint files with wages GREATER than $250,000
Single or HOH GREATER than $200,000
Self-employment income above those levels
What is the 3.8% tax on net investment income rules?
Lower of:
1) Net Investment Income
2) Modified AGI in excess of thresholds
Thresholds:
$200,000 (Single)
$250,000 (Married Filing Joint)
What is included in net investment income?
Interest Dividends Annuities Rents Royalties Trading instruments/commodities Income from a PASSIVE ACTIVITY
