Tax Insights

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Individual AMT and the tax reform impact

AMT, tax reform, moneyWith the new tax law in place, there are a lot of changes happening for individual income taxes, including with AMT. Under the new legislation, changes go into effect for income earned starting in 2018. Many of the tax provisions that apply to individuals are set to expire at the end of 2025 and there are various planning opportunities that can be taken to help minimize taxes.

Part of the new legislation covers changes in alternative minimum taxes which get triggered when taxpayers make a certain level of income. AMT parallels the regular income tax and recalculates income tax after adding certain tax preference items back into income. With the new tax rules, it reduces the number of filers who would be hit by AMT by raising the exemption amounts to $70,300 for single filers, up from $54,300 currently and to $109,400 up from $84,500 for married filing jointly. In addition, the thresholds for the phase-out of the AMT exemption are also increased to $500,000 for single filers and $1 million for married filing jointly.

The increased exemption and exemption phase-outs mean more people won’t get affected by AMT, which is set to expire on December 31, 2025. Some planning strategies for individuals affected by AMT in prior years include taking advantage of minimum tax credit carryforwards that may have been triggered for future tax years.

Keerthana Nichanamatlu