Guide to Alternative Minimum Tax (AMT)

Alternative minimum tax, or AMT, is an additional tax you pay on top of the regular income tax. Originally designed to prevent high-income individuals from using tax shelters and other gimmicks to pay less than their fair share, it now applies to millions of ordinary taxpayers. Broadly speaking they can be divided into three groups:

• People with larger than average deductions for personal exemptions and/or state and local taxes. Often there is little they can do to plan around this problem.
• People who exercise incentive stock options and decide to hold the shares. Planning is often crucially important for these people. (See our books Consider Your Options for people who receive options and Equity Compensation Strategies for professional advisors.)
• People with some unusual item on their tax return, such as a large long-term capital gain.

Pages in this guide are listed below in two categories, first covering AMT in general, and second providing details on the refundable AMT credit, a topic that's generally of interest only to people who paid AMT years ago after exercising incentive stock options and failed to recover all their AMT payment as a credit.

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Here's a list of pages available in this guide.

AMT in general

• Alternative Minimum Tax 101
  Read this page to get the big picture.
• Top 10 Things that Cause AMT Liability
  Or maybe 11.
• AMT and Long-Term Capital Gain
  Explains why you may run into alternative minimum tax liability when you have a large long-term capital gain — and what you can do about it.
• AMT Capital Loss Trap
  Some people inadvertently pay AMT they don't owe when they fail to realize a regular tax capital loss carryover can be used in the AMT calculation.
• Dual Basis Assets
  It's important to realize that you can end up owning assets that have an AMT basis that's different from the basis you use for regular tax purposes. If you miss this detail you may end up throwing tax dollars away.
• Claiming AMT Credit
  You may be able to claim AMT credit from exercising an incentive stock option even if you haven't sold the shares. If you failed to do so, you have a limited amount of time to correct the mistake.

Long-term unused minimum tax credit

These pages provide detailed guidance on the refundable credit for long-term unused minimum tax credit, which became available in 2007.

• Refundable AMT Credit
  Overview of the refundable credit.
• Refundable AMT Credit Calculation
  A description of the steps in calculating the refundable AMT credit.
• Long-Term Unused Credit
  Rules for determining how much of your unused credit is long-term.
• Tentative Refundable Credit
  This is the portion of your long-term unused credit you're allowed to claim, subject to coordination with the regular AMT credit.
• Coordination with Regular AMT Credit
  The refundable credit is allowed only to the extent it exceeds the nonrefundable AMT credit.

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