Form 6251: Definition of Alternative Minimum Tax for Individuals

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What is Form 6251: Individuals with Alternative Minimum Tax?

Form 6251: Alternative Minimum Tax-Individuals is an Internal Revenue Service (IRS) tax form used to determine the amount of alternative minimum tax (AMT) that a taxpayer may owe. Some taxpayers with higher incomes may benefit from certain deductions which allow them to reduce their regular tax liability. The AMT sets an upper limit on the amount of this deduction to ensure that the wealthiest people pay an adequate amount of tax. If you are one of those to which it applies, you will pay the AMT instead of the standard income tax.

Key points to remember

  • Form 6251 is used to determine whether taxpayers owe alternative minimum tax instead of standard income tax.
  • The AMT was designed to ensure that the rich pay their fair share of taxes.
  • The AMT changes that were part of the Tax Cuts and Jobs Act significantly reduced the number of taxpayers required to pay it.
  • The IRS increased the AMT in 2022 to $ 75,900 for individuals and $ 118,400 for spousal filers who are married.
  • Created in 1969, the AMT is a tax system parallel to the ordinary income tax.

Understanding Form 6251: Individuals on Alternative Minimum Tax?

Each taxpayer must assess whether or not he must pay the AMT each year. Depending on your income level, you may not need it.

The AMT is a tax system parallel to the ordinary income tax. It was enacted in 1969 and was originally designed to identify and collect taxes owed by a limited number of wealthy individuals and families who otherwise avoided income tax.

It does this by limiting the number of itemized deductions that can be claimed by a taxpayer. Deductions for national and local taxes are not allowed, for example. In addition, taxpayers affected by the AMT cannot benefit from the standard deduction.

The AMT has two rates (26% and 28%) against the seven federal tax brackets, which range from 10% to 37%.

How to Complete Form 6251: Individuals on Alternative Minimum Tax

The Form 1040: US Individual tax Return includes a worksheet that allows a taxpayer to determine whether the AMT is due, but it only provides basic calculations. Form 6251 is more detailed and will give a more accurate answer, and just filling it out doesn’t mean it needs to be filed. Alternatively, you can use tax software or hire a tax professional. It is only if there is an LMO due that Form 6251 should be attached to Form 1040.

The AMT obliges the taxpayers concerned to calculate their tax bill under the ordinary income tax regime and again under the AMT, paying the higher of the two amounts. After calculating your AMT, you can request an exemption based on your filing status.

The AMT exemption is much higher than the standard exemption but gradually disappears when you reach a certain income level. In 2021, the AMT exemption for individual filers is $ 73,600 and for married spousal filers $ 114,600. In 2022, the AMT exemption for individual filers increases to $ 75,900 and to $ 118,100 for married spousal filers. The exemption begins to disappear when income reaches $ 539,900 for individual filers and $ 1,047,200 for married spousal filers.

All pages of Form 6251 are available on the IRS website.

Special considerations

The lack of inflation adjustments meant that the AMT applied to a much larger group of taxpayers than originally anticipated. Congress passed annual inflation adjustments to limit the scope of the AMT before instituting a permanent indexation solution for future inflation exemption levels under the American Taxpayer Relief Act. 2012.

The AMT collected $ 4.7 billion in 2019, or about 0.3% of personal income tax revenue. This is a significant drop from the $ 36.2 billion collected in 2017, mainly due to the AMT changes that were part of the Tax Cuts and Jobs Act (TCJA) of 2017. Effective from 2018, for example, the TCJA triggered a higher AMT exemption and the level at which the exemption is starting to disappear.


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