Form 5768 North Carolina 2016-2025

Form 5768 North Carolina: What You Should Know

There are, however, some signs that your taxable income is below the AMT. Read on for answers to the most commonly asked questions about the AMT. What is the Alternative Minimum Tax (AMT)?  — The IRS What is the Alternative Minimum Tax? There is an Internal Revenue Service (IRS) program which is designed to prevent taxpayers from claiming certain tax preferences that they normally would or could claim without penalty. The AMT is a part of that program. Alternative minimum tax is the portion of federal income taxes which is exempt from the AMT. What is the Alternative Minimum Tax? When an individual's taxable income is below a certain rate, he is subject to the alternative minimum tax (AMT, sometimes incorrectly described as the FICA tax). If you are subject to the AMT, and are eligible for other AMT exemptions, your marginal tax rate may be below those which are exempt under the AMT. The AMT is a tax on all income above certain levels, which is set in the tax code at adjusted gross income (AGI) level So if someone has a taxable income of 10 million and lives in New Jersey, his taxable income will range from 10 million to 20 million. All taxable income is subject to the AMT, the second half of which is the first half of the AMT exemption. How does the AMT work? The AMT applies to all amounts under the first 97,200 of AGI. The lower of the two AMT tax bracket limits applies to the first 2,600 of the AMT total. Then only amounts from 97,200 to 97,800 of AGI may be taxed at the AMT's lower tax bracket of 25%. The lowest AMT bracket is 40%. That means if someone owes 5,900 in federal income taxes, his effective tax rate would be about 25%-40%. If someone owes 37,000 and pays tax on 22,900, his effective annual tax rate for that year would be about 29%, which is below the 40% bracket. You may have to do some arithmetic to compute the highest income tax bracket or other rate which applies. What are the AMT exemptions? The AMT exemption is the highest level which is not subject to both the income tax and AMT. The AMT tax rate is applied to the total amount of the 2,600 AMT tax bracket limit.

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