Some adjustments that many of us use in preparing our taxes that can make you subject to the AMT are:
itemized deductions for state and local taxes
other miscellaneous expenses
mortgage interest on home equity debt
exercising (but not selling) incentive stock options
tax-exempt interest from private activity bonds
passive income or losses
net operating loss deduction
foreign tax credits
exercise of stock options and
This is not all inclusive but it is a list of the primary drivers.
The AMT will impact more of the populations as stated in the previous post (see below). If nothing changes and the tax breaks expire and the AMT is adjusted as expected, the exemptions will go from $48,450 to $33,750 for single and head of household filers, from $74,450 to $45,000 for married people filing jointly and for qualifying widows or widowers, and from $37,225 to $22,500 for married people filing separately.
As an example if you made $110,000 and then deducted out $50,000 in various approved deductions, you may find yourself with $60,000 in taxable income and in a 15% tax bracket and paying $9,000 in taxes. With the AMT (this is an oversimplification but gives you an idea of what the difference might be) you would get your exemption of $45,000 and let's say $10,000 in certain allowed deductions and you still end up with $55,000 taxable income for the AMT. Your AMT tax would be 26% which means that you would pay $14,300in taxes, an increase of $5,300 or 58% more tax paid.
You can get credit in future years for paying the AMT but as you can see, this can have a significant impact to the bottom line, especially when added to the expiring tax cuts.
Also remember, ALL OF THIS IS SUBJECT TO CHANGE as our illustrious leaders negotiate the nations debt crises with our tax dollars.
Source: Code Section 55(d)(1). Lower exemption levels mean that more taxpayers will be subject to the alternative minimum tax calculations.