Taxes: AMT & Other Taxes

Question 1

Taxes:
AMT & Other Taxes
Self-Employment Tax

Answer 1

Self-Employment Tax
- 2 parts, retirement rate and health insurance rate
- capped by a maximum amount of wages
- SS: 12.4% of first $118,500
- if wages > than ceiling, reduce by amount subject to OASDI
- medical: 2.9% on all wages (no ceiling)
- SE tax imposed on income from self employment - deductions from the activity
- distributive share of income from partnership is income if material participant. Not if S corp.
- multiply self employment by 0.9235.
- must exceed $400 to be assessed
- 1/2 is deductible for AGI
Nanny Tax
- must withhold and pay tax for domestic workers if above $1,900

Question 2

Taxes:
AMT & Other Taxes
Payroll

Answer 2

Payroll

• 6.2% social security
• 6.2% Medicaid

Question 3

Taxes:
AMT & Other Taxes
AMT Calculation

Answer 3

AMT Calculation:
Regular TI
\+/- Adjustments
\+ Preferences
= AMT Income
- Exemption
= AMT Base
x Rate
= Tentative Minimum Tax b/4 Foreign Tax Credit
- Certain Credits
= Tentative Minimum Tax
- Regular Tax Liability
= AMT (if positive)

Question 4

Taxes:
AMT & Other Taxes
AMT Adjustments

Answer 4

AMT Adjustments

1. MACRS 3,5,7, 10 year property using 200% declining balance. Only 150% for AMT.
2. % Completion contract > Completed Contract Income
3. Itemized Deductions
   - phaseouts subtracted
   - medical only to extent 10% AGI
   - no deduction for taxes
   - 2% Miscellaneous not allowed
   - home mortgage interest only if loan proceeds used to acquire a home
4. Personal Exemptions and Standard Deduction added back
5. compensation element on exercise date for an incentive stock option plan
6. No Installment Method

Question 5

Taxes:
AMT & Other Taxes
AMT Preferences

Answer 5

AMT Preferences

• always increase AMT Income
  1. Tax Exempt Interest on private activity bonds
• after 2008, not housing bonds for low-income housing, mortgage bonds, or mortgage bonds for veterans
• no interest on private activity bonds if issued in 2009 or 2010
  2. % of completion > cost basis on mineral properties
  3. Qualifying Small Business Stock
• 7% of gain excluded only if held for 5 years
• not if bought after 2010 and before 2015 and held for 5 years

Question 6

Taxes:
AMT & Other Taxes
AMT Exemption

Answer 6

AMT Exemption

• $83.4k MFJ and $53.6 Single
• phaseout triggered by AMTI > $158,900 MFJ or $119,200 Single
• phaseout rate of 25% over trigger
• children’s earned income cannot exceed earned income + $7,400
• 25% and 28% tax brackets

Question 7

Taxes:
AMT & Other Taxes
AMT Tax Credits

Answer 7

AMT Tax Credits

1. foreign tax credit allowed along with:
   - child tax credit
   - adoption credit
   - american opportunity and lifetime earning
   - low-income saver’s credit
   - residential energy efficiency property credit
   - nonbusiness energy property credit
   - credit for elderly and disabled
   - child and dependent care credit
2. preferential tax rates on capital gains
3. Taxpayers pay greater of TMT or regular tax
4. amount of AMT paid due to timing creates AMT credit that can offset tax liability in future years