Memorize the following:
AMT – Individuals:
Regular taxable income
± Adjustments & preferences (Adj – SIMPLE; Pref – PIE)
= AMT before exemption
(Exemption)
= AMTI
x Tax Rate (26%/28%)
= Tentative Minimum Tax
(Regular Tax)
= AMT
Adjustments for AMT for individual (either increase or decrease AMTI):
SIMPLE:
Standard deduction may not be claimed
Interest on home equity loans is not deducted
Medical expenses under 10% of AGI cannot reduce AMTI
Personal and dependent exemptions are not allowed
Local and state income taxes, all property taxes and sales taxes are not deductible
Employee business, tax preparation, and investment expenses subject to 2% Other Miscellaneous threshold are not deductible
Tax preferences for AMT for individuals (only increase AMTI):
PIE:
Private activity bond interest is fully taxable
Incentive stock options (taxed when exercised for the difference between exercise price and market price of stock)
Excess depreciation on personal property (over 150% declining balance when double declining balance was used for regular tax purposes)
Corporate AMT:
Regular taxable income
± Adjustments & preferences (PILE)
= AMTI before ACE adjustment
± Adjusted current earnings (ACE) adjustment (SLIM)
= AMTI before exemption
(Exemption)
= AMTI
x Tax Rate (20%)
= Tentative Minimum Tax
(Regular Tax)
= AMT
Adjustments and preferences for AMT for a corporation:
PILE:
Private activity bonds (Interest income on certain forms of municipal bonds)
Installment sales inventory (difference between accrual accounting & the installment method for installment sales inventory when the installment method was used for regular tax purposes
Long term contract income (must be calculated using the % of completion method)
Excess depreciation on personal property over 150% declining balance when DDB was used for regular tax purposes
Items added to AMTI before ACE adjustment in order to compute ACE adjustment for corporation:
SLIM:
Seventy percent dividends received deduction (DRD) on dividends from unrelated corporations (80% & 100% DRDs do not have to be added back)
Life Insurance proceeds on death of a key employee
Municipal bond interest from all such bonds (except private activity bonds, which were already included in AMTI before ACE adjustment)
.