Alternative Minimum Tax Changes for Individuals and Businesses

One of the policy changes of the 2017 Tax Cuts and Jobs Acts concerned the Alternative Minimum Tax (AMT). The AMT system is separate from the traditional tax system, functioning on a completely different set of deductions and exemptions. Some taxpayers end up paying more than they normally would due to the AMT requirements. However, significant changes have been made, some of which may affect individuals and businesses.

Personal Tax Under AMT

AMT exemption minimums have been increased in the 2017 Tax Cuts and Jobs Acts, as well as the threshold for phasing out benefits from the AMT system. For 2018, the exemption amounts have been changed as follows:

  • Married Filing Joint – Exemption amount raised to $109,400 from $86,200; threshold for phasing out raised to $1,000,000 from $164,100
  • Married Filing Separately – Exemption amount raised to $54,700 from $43,100; threshold for phasing out raised to $500,000 from $82,050
  • Single Taxpayer – Exemption amount raised to $70,300 from $55,400; threshold for phasing out raised to $500,000 from $123,100

The final result is that fewer taxpayers in total will be affected by AMT. The rules above have a sunset date of January 1, 2026.

Additionally, personal exemptions and the $10,000 cap on local/state income and property tax have both been limited instead of completely disallowed.

Business Tax Under AMT

As of January 1, 2018, all corporate AMT is completely repealed as per the new Tax Act. Companies that have AMT credit carryovers to tax years that occur after this point may use them as an offset against regular business tax liabilities.

If a company has an AMT credit carryover that is larger than the normal tax liability in tax years 2018, 2019 and 2020, half of that excess carryover is deemed refundable. Any AMT carryover credits that remain from here become fully refundable in the year 2021. The overall result is that companies that were previously forced into the AMT structure will likely see a reduction in tax liability because of the reduction in the normal corporate tax rate.

If you have any questions about these changes, please contact us today!


ABOUT THE AUTHOR

Brittany E. Wood

Brittany is a Staff Accountant with Brown Schultz Sheridan & Fritz. She specializes in providing tax services for clients.

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