The tax laws give preferential treatment to certain kinds of income
and allow special deductions and credits for certain kinds of expenses.
The alternative minimum tax attempts to ensure that all individuals who
benefit from these tax advantages will pay at least a minimum amount of
tax.
The alternative minimum tax is a separate tax computation that, in
effect, eliminates many deductions and credits, thus creating a tax liability
for an individual who would otherwise pay little or no tax. The tentative
minimum tax rates on ordinary income are 26% and 28%. For capital gains,
the maximum capital gains rates are used.
You may have to pay the alternative minimum tax if your taxable income
for regular tax purposes, plus any of the adjustments and preference items
that apply to you, is more than an exemption amount. The exemption amounts
are:
- $45,000 if you are married filing jointly or are a qualifying widow
or widower,
- $33,750 if you are single or head of household,
- $22,500 if you are married filing separately, or an estate or trust.
For a child under age 14, special rules apply.
To determine if you may be subject to the alternative minimum tax,
see the 1998 Form 1040 instructions
for Line 51.
If you are liable for alternative minimum tax, you should complete
Form 6251 Alternative Minimum
Tax - Individuals. If you paid alternative minimum tax in one or more
previous years, you may be eligible to take a special credit against your
regular tax. If eligible for 1998, you should report this credit on Line
47 of Form 1040 and check Box C. Also, use Form
8801, Credit for Prior Year Minimum Tax - Individuals, Estates and
Trusts.
Forms and publications can be downloaded
from this site, or ordered by calling 1-800-829-3676.
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