What are the AMT exemption amounts for 2020?
Each year the AMT exemption amount automatically adjusts with inflation. The AMT exemption is like a standard deduction for calculating the alternative minimum tax. It’s a flat exemption figure and once you exceed it, each dollar becomes taxable.
The current exemption amounts for 2020 are:
- $71,700 for single taxpayers
- $111,700 for married taxpayers filing jointly
- $55,850 for married taxpayers filing separately
- $71,700 for taxpayers filing as the head of household
How can I plan for the AMT?
The simplest way to plan ahead for the AMT is to look at your last year's Form 6251 and compare the Tentative Minimum Tax to your regular tax to see how close you were to paying the AMT.
Depending on your annual income and deductions, you could be affected by the AMT in one tax year, but not the next. But if you’re close to the AMT threshold, it’s a good idea to do a projection exercise for a few years out to see which tax years might leave you the most exposed and how to mitigate that risk.
For example, could you accelerate or delay certain transactions to minimize the risk of triggering the AMT? Or what's the best tax year to sell an asset with a large gain?
While triggering the AMT is unfavorable, it's not the end of the world. Be prepared and aware if you are vulnerable, but it shouldn't change the trajectory of your financial goals. Additionally, as tax law is constantly changing, it might be best to work with a CPA to plan for managing your taxes.
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