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 anyone who benefits 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 for the regular tax 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:

1. $45,000 if you are married filing jointly or are a qualifying widow or widower,
2. $33,750 if you are single or head of household,
3. $22,500 if you are married filing separately. 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 are not liable for alternative minimum tax this year, but you paid alternative minimum tax in one or more previous years, you may be eligible to take a special minimum tax credit against your regular tax this year. If eligible, 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 may be downloaded from this site, or ordered by calling 1-800-829-3676.

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