Alternative Minimum Tax (AMT)
Definition:
The AMT basically amounts to a second tax system under which youmay be required to figure your taxes if your income exceeds acertain level. To calculate the income at which you’ll fall underAMT, you have to add various tax preferences and adjustments toyour taxable income, and a $33,750 exemption ($45,000 for marriedfiling jointly and $22,500 for married filing separately) isdeducted. The exemption starts to phase out once AMT income exceedscertain levels. Determining exactly what that level is in your caseis tricky, however. So it’s recommended that you consult a taxadvisor to find out whether you may be subject to the AMT.
Two things don’t require much analysis, however. Since the AMTamounts aren’t indexed to inflation, with each year that passes,you’re more likely to fall under AMT. And if your company and yourwealth are growing, you’re more likely to become subject to the AMTas well.
