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11136: Alternative Minimum Tax


1040 Individual

How are the forms or worksheets with Alternative Minimum Tax (AMT) amounts calculated? Why is the AMT calculating on a return when it shouldn't be?   

 

For Alternative Minimum Tax purposes, certain items of income, deductions, etc., receive different tax treatment than for the regular tax. They therefore may show different amounts than would display for regular tax.

For the regular tax, some deductions and credits may result in carrybacks or carryforwards to other tax years. Examples are investment interest expense, a net operating loss, a capital loss, a passive activity loss, and the foreign tax credit.

Because you may have to re-figure these items for alternative minimum tax purposes, the carryback or carryforward amount may be different for the AMT than for the regular tax. Your at-risk limits and basis amounts also may differ for the AMT.

If you owe AMT, you may be able to lower your total tax (regular tax plus AMT) by claiming itemized deductions on Form 1040 or Form 1040-SR, even if your total itemized deductions are less than the standard deduction. This is because the standard deduction is not allowed for the AMT and, if you claim the standard deduction on Form 1040 or Form 1040-SR, you cannot claim itemized deductions for the AMT.

For more information about AMT see:

Calculating in Error

The most common cause of AMT (Alternative Minimum Tax) being calculated when it should not be is a missing Date of birth on the Name and Address screen (screen 1 in data entry).

If the date of birth is entered, and the format is correct, it may be that information entered on the return is generating AMT. Review the following list to verify that none of these items are claimed on the return.

  • Accelerated Depreciation
  • Stock by exercising an incentive stock option and the stock was not disposed of in the same year
  • Tax exempt interest from private activity bonds
  • Intangible drilling, circulation, research, experimental or mining costs
  • Amortization of pollution-control facilities or depletion
  • Income (or loss) from tax-shelter farm activities or passive activities
  • Income from long-term contracts not figured using the percentage-of-completion method
  • Interest paid on a home mortgage NOT used to buy, build or substantially improve your home
  • Investment interest expense reported on Form 4952
  • Net operating loss (NOL) deduction
  • Alternative minimum tax adjustments from an estate, trust, electing large partnership or cooperative
  • Section 1202 exclusion
  • Any general business credit in Part I on Form 3800
  • Empowerment zone and renewal community employment credit
  • Qualified electric vehicle credit
  • Alternative fuel vehicle refueling property credit
  • Credit for prior year minimum tax

Review entries on K1 screens (K1P, K1S, K1F).  Entries on these screens may play a role in the calculation of AMT, in particular items entered for alternative minimum tax (line 17 on a K1P screen, line 12 on a K1F screen, and line 15 on a K1S screen). Capital gains, as figured in Part III of Form 6251, may also affect the assessment of AMT.


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