Posts Tagged "AMT"

Do you need to think about the alternative minimum tax?

Posted on Jan 3, 2017

You may not have thought much about the alternative minimum tax, or AMT, since Congress passed a law that permanently fixed the exemption. But the tax, which you calculate separately from your regular tax liability, is still around. Here’s how the AMT might apply to your 2016 tax return. Certain income and deductions, known as preference items, are added to or subtracted from the income shown on your federal income tax return to arrive at your AMT taxable income. For example, certain bond interest that you exclude from your regular taxable income must be included when computing income for the AMT. This is a “preference item” because tax-exempt interest gets preferential treatment under ordinary federal income tax rules. AMT “adjustments” also affect whether you’ll owe the tax. These include personal exemptions and your standard deduction. In the AMT calculation, these taxable-income reducers are not deductible. Instead, they’re replaced with one flat exemption, which is generally the amount of income you can exclude from the AMT. For your 2016 return, the AMT exemption is $83,800 when you’re married filing a joint return or are a surviving spouse, $53,900 when you file as single, and $41,900 if you’re married and file separately. The exemption decreases once your income reaches a certain level. Finally, only some itemized deductions, such as charitable contributions, are allowed in the AMT calculation. Others, including medical expenses and mortgage interest, are computed using less favorable rules. Need help determining whether the AMT will apply to your 2016 return? Give us a call. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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AMT paid by millions of taxpayers

Posted on Aug 13, 2014

In a recent income statistics bulletin, the IRS reported that the alternative minimum tax (AMT) affected a record 4.25 million tax returns and collected $30.48 billion in taxes during tax year 2011. The AMT was created years ago to ensure that high-income taxpayers could not escape all taxes through the use of deductions and credits. The recent report indicated that more than half of the $30 billion of AMT collected in 2011 was from individuals earning between $200,000 and $500,000. The number of taxpayers hit by the AMT has more than tripled since 2001. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter...

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The AMT: Will this tax apply to you?

Posted on Feb 7, 2014

What’s your alternative minimum tax (AMT) preference? Though you might prefer to not think about the AMT, certain income and deductions, known as preference items, affect the way the tax will apply to you. Those amounts, along with others called “adjustments,” are added to or subtracted from the income shown on your tax return to arrive at your AMT taxable income. For example, certain bond interest that you exclude from your regular taxable income must be included when computing income for the AMT. This is a “preference item” because tax-exempt interest gets preferential treatment under ordinary federal income tax rules. Adjustments include personal exemptions and your standard deduction. In the AMT calculation, these taxable-income reducers are not deductible. Instead, they’re replaced with one flat exemption, which is generally the amount of income you can exclude from the AMT. Note: For your 2013 tax return, the AMT exemption is $80,800 when you’re married filing a joint return or are a surviving spouse, $51,900 when you file as single, and $40,400 if you’re married and file separately. The exemption decreases once your income reaches a certain level. What if you itemize? Some itemized deductions are allowed, such as charitable contributions. Others, including medical expenses and mortgage interest, are computed using less favorable rules. Whatever AMT preference – or adjustment – applies to you, we’re here to help calculate the best tax outcome. Please contact us for details or assistance. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter...

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Congress averts tax portion of fiscal cliff

Posted on Jan 11, 2013

The “American Taxpayer Relief Act of 2012” approved by Congress just after we plunged over the “fiscal cliff” restores and modifies several expired tax breaks, but doesn’t address other issues. Here are the highlights of the new law’s provisions for individual taxpayers. * Individual income taxes. Only the wealthiest taxpayers face an income tax increase in 2013. A new individual tax rate of 39.6% will apply to single filers with income above $400,000 and joint filers with income above $450,000. Otherwise, the 2012 tax rate structure is permanently extended. However, beginning in 2013, a new 3.8% Medicare surtax authorized by the 2010 health care law also applies to certain high-income investors. * Capital gains and dividends. Under prior law, the maximum tax rate for net long-term capital gains would have been boosted to 20%, while qualified dividends were scheduled to be taxed at ordinary income rates, beginning in 2013. The new law extends the favorable 15% tax rate for most taxpayers and extends the zero tax rate for those in the 10% and 15% brackets for ordinary income. However, for single filers with income above $400,000 and joint filers with income above $450,000, the maximum tax rate on long-term gains and qualified dividends increases to 20%. * Alternative minimum tax. Retroactive to January 1, 2012, the new tax law permanently revamps the alternative minimum tax (AMT) to avoid increased exposure to this “stealth tax.” Without the latest fix, an estimated 30 million more filers would have been required to pay the AMT for the 2012 tax year. * Payroll tax holiday. The 2% reduction in payroll taxes ends. Employees will pay a 6.2% social security tax instead of the 2012 rate of 4.2%. Similarly, the social security tax rate for self-employed individuals reverts to 12.4% from 10.4%. * Itemized deductions and personal exemptions. Restrictions are imposed on high-income taxpayers with income above a specified threshold. For single filers with adjusted gross income (AGI) above $250,000 and joint filers with income above $300,000, certain itemized deductions are reduced by 3% above the threshold, but the overall reduction can’t exceed 80%. Personal exemptions are phased out above the same AGI thresholds without the 80% cap. * Tax extensions. The new law generally extends, for varying time periods and with certain modifications, several favorable provisions that had expired. The list includes the child, dependent care, adoption, and earned income credits; tax relief from the “marriage penalty”; the American Opportunity Tax Credit for higher education expenses; the deduction for tuition and related fees; the optional state sales tax deduction; the enhanced deduction for student loan interest; the $250 deduction for an educator’s classroom expenses; energy credits for qualified home improvements; a conservation donation tax benefit; and the tax-free IRA-to-charity contribution of assets up to $100,000 for taxpayers age 70½ and older. * Estate and gift taxes. The new law avoids drastic changes for several provisions that had officially ended after 2012. Significantly, the estate tax exemption, which had been scheduled to drop to $1 million from $5 million (inflation-indexed to $5.12 million in 2012) remains at $5 million with inflation indexing. Portability of exemptions between spouses is preserved. The top estate tax rate, which had been scheduled to increase from 35% to 55% in 2013, is bumped up to 40%. The estate and gift tax changes are permanent. * Business provisions. The new law also temporarily preserves several tax breaks for businesses — including the research credit, the enhanced work opportunity tax credit, a higher Section 179 deduction, 50% bonus depreciation and faster write-offs for qualified leasehold improvements — as well as extending unemployment benefits and higher payments to Medicare providers. This latest tax law is not likely to be the final word on taxes in 2013. Congress is once again talking about a complete revision of the tax code. Also, the spending side of the “fiscal cliff” issue is yet to be dealt with. Stay tuned for ongoing changes that could affect your personal and business tax...

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What’s ahead? Tax changes scheduled for 2013

Posted on Dec 27, 2012

Unless Congress acts by year-end, these are the changes you’ll see in the tax rules effective January 1, 2013. *SOCIAL SECURITY TAXES. Employee’s share will increase to 6.2% after 2012, up from 4.2%. *INCOME TAX RATES. 2012 rates of 10%, 15%, 25%, 28%, 33%, and 35% will change to 15%, 28%, 31%, 36% and 39.6% for 2013. *CAPITAL GAINS. Maximum long-term rate will increase from 15% to 20% after 2012. *DIVIDENDS. Top 15% rate will be eliminated; dividends will be taxed as ordinary income with a top rate of 39.6%. *CHILD TAX CREDIT. Current $1,000 credit per qualifying child will be reduced to $500 after 2012. *AMT. Exemption amounts will be $33,750 for singles, $45,000 for couples. *ESTATE TAX. Top 2013 rate will increase to 55% (up from 35%); exclusion amount will be reduced to $1,000,000 (down from 2012 amount of $5,120,000). *DEDUCTIONS & EXEMPTIONS. After 2012, higher-income taxpayers will again lose a portion of itemized deductions and personal exemptions. *DEPRECIATION. Section 179 expensing limit will be reduced to $25,000, with a total qualifying property limit of $200,000, down from 2012 levels of $139,000 and $560,000 respectively. 50% bonus depreciation will expire. *EDUCATION. Education savings account contribution limit will be $500, down from 2012 limit of $2,000. Expanded American Opportunity Credit will expire and be replaced by prior Hope Credit. *TAX EXTENDERS. These tax breaks expired at the end of 2011: Teachers’ classroom expense deduction, state and local sales tax deduction, tax-free charitable IRA distributions for those 70½ and older, higher education tuition deduction, business R&D credit, and 15-year depreciation for leasehold improvements and restaurant property. Stay tuned. Congress and President Obama may agree to extend or revise some or all of these provisions. We’ll keep you...

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