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Tax Reform FAQs: Is the AMT Repealed?
February 16, 2018The dreaded Alternative Minimum Tax....did Congress keep it around? Read on...there are some noteworthy changes you’ll want to know about.
Did you tune into our recent webinar? Don’t worry if you missed it—you can find it here- “The Impact of Tax Reform on Businesses and Individuals”. Over the next few weeks, we will be covering some frequently asked questions in the area of tax reform. This week, we tackle the AMT and whether or not tax reform impacted this tax.
The Alternative Minimum Tax, or AMT was on the chopping block during the early stages of tax reform discussions, but what ended up happening with it? Is it still in place? The short answer- yes, but you’ll want to make note of some significant changes.
What is the AMT?
The Alternative Minimum Tax is a mandatory alternative to the standard income tax. It gets triggered when taxpayers make a certain income and eliminates many deductions for those in higher brackets to make sure they pay at least some taxes.
That's what makes the AMT undesirable for taxpayers who are affected. If you make more than the trigger income, you’re forced to calculate your taxes twice (once for the regular income tax, and once for the AMT). To add insult to injury, you're then liable to pay the higher tax bill.
Updates under TCJA
The Tax Cuts and Jobs Act keeps the AMT, but raises the exemption and phase-out levels from 2018 through 2025, meaning it will affect 200,000 tax filers instead of the 5 million affected in 2017. The bill includes a cost of living adjustment.
Changes to AMT
| Pre Act Law | Under TCJA 2018-2025 | |
|---|---|---|
| AMT Exemption | ||
| MFJ (Married Filing Jointly) | $86,200 | $109,400 |
| Single | $55,400 | $70,300 |
| Exemption Reduction Threshold | ||
| MFJ | $164,100 | $1,000,000 |
| Single | $123,100 | $500,000 |
Are corporations still subject to the tax?
No, Congress eliminated the AMT for corporations.
What about AMT carryovers from previous years?
For individuals, the AMT credit is still a nonrefundable credit. The amount of the credit a taxpayer is allowed to take in a year is limited to the taxpayer’s regular tax liability over the tentative minimum tax for the year.
For corporations, the credit carryover is allowed to offset the regular tax liability for any taxable year. In addition, the AMT credit is refundable for any taxable year beginning after 2017 and before 2022 in an amount equal to 50% (100% beginning in 2021) of the excess of the minimum tax credit for the taxable year over the amount of the credit allowable for the year against regular tax liability.
Do you lose itemized charitable deductions if subject to AMT?
No, charitable deductions are not an AMT add-back. You can feel free to donate at will. You should consider “bunching” donations (doing a few years’ worth of donations in a single year) if you are struggling to get your itemized deductions above the new increased standard deduction.
Learn more about AMTs and the TCJA by checking out our blog, “Four Tax Law Changes that Could Affect You.”
Questions on the AMT? Reach out to any member of our Tax Services Team.
