What Is the Alternative Minimum Tax?
How do I evaluate my exposure to AMT? How do municipals affect AMT? A: The Alternative Minimum Tax is an added tax structure put in place some years ago to make sure that even those who took advantage of large deductions and exotic tax shelters paid income tax. It has received much publicity lately, because the amounts subject to it have not been adjusted for inflation. As a result, many taxpayers now considered middle income have found themselves subject to it. It is nearly impossible to explain concisely how to evaluate AMT exposure. The instructions to Form 1040 contain a helpful worksheet which will give you an idea if you have exposure. And if completing the worksheet indicates you have exposure, you should complete Form 6251 to actually compute the amount. Interest received from “private activity” municipal bonds, while exempt from regular income tax, is taxable for AMT purposes. Private activity bonds are those that municipalities issue to provide funds to entice businesses to l
