Form 6251: Alternative Minimum Taxpayer

What is Form 6251: Alternative Minimum Taxpayer?

Form 6251: Alternative Minimum Taxpayer is an Internal Revenue Service (IRS) tax form used to determine the amount of Alternative Minimum Tax (AMT) a taxpayer may owe. Some higher-income taxpayers can claim certain deductions to reduce their regular tax liability. AMT sets a cap on the amount of deductions to ensure wealthier individuals pay enough tax. If you belong to one of the groups it applies to, you will pay AMT instead of standard income tax.

key takeaways

  • Form 6251 is used to determine whether a taxpayer is subject to alternative minimum tax instead of standard income tax.
  • AMT is designed to ensure that the wealthy pay their fair share of taxes.
  • The AMT changes that were part of the Tax Cuts and Jobs Act greatly reduced the number of taxpayers who had to pay.
  • The IRS raised the AMT to $75,900 for individuals and $118,100 for married joint filers in 2022.
  • Created in 1969, AMT is a tax system parallel to the regular income tax.

Understanding Form 6251: Alternative Minimum Taxpayer

Every taxpayer must assess whether they must pay AMT annually. Depending on your income level, you may not need it.

AMT is a tax system parallel to the regular income tax. Enacted in 1969, it was originally designed to identify and collect taxes owed by a limited number of wealthy individuals and families who otherwise evaded income tax.

It does this by limiting the number of itemized deductions that taxpayers can claim. For example, state and local tax deductions are not allowed. Additionally, taxpayers affected by AMT cannot take the standard deduction.

AMT has two tax rates (26% and 28%) and seven federal tax brackets ranging from 10% to 37%.

How to File Form 6251: Substitute Minimum Taxpayer

Form 1040: U.S. Individual Tax Return includes a worksheet that allows taxpayers to determine if they owe AMT, but it only provides basic calculations. Form 6251 is more detailed and will give more accurate answers. Simply filling in does not mean it must be submitted. Alternatively, you can use tax software or recruit tax experts. Form 6251 must be attached to Form 1040 only if AMT is owed.

AMT requires affected taxpayers to calculate their tax bill under the ordinary income tax system and again under AMT, paying the higher of the two amounts. After calculating your AMT, you can apply for a waiver based on your application status.

The AMT allowance is much higher than the standard allowance, but it is phased out when you reach a certain income level. In 2021, the AMT waiver is $73,600 for individual filers and $114,600 for married joint filers. In 2022, the AMT waiver will be up to $75,900 for individual filers and up to $118,100 for married joint filers. The exemption begins to phase out when income reaches $539,900 for individual filers and $1,047,200 for married joint filers.

All pages of Form 6251 can be found on the IRS website.

special attention items

The lack of inflation adjustment has resulted in the AMT applying to a larger group of taxpayers than initially anticipated. As part of the US Taxpayer Relief Act of 2012, Congress has passed annual inflation adjustments to limit the scope of the AMT and then tie future exemption levels to inflation.

AMT collected $4.7 billion in 2019, or about 0.3% of personal income tax receipts. This is a significant drop from the $36.2 billion collected in 2017, mainly due to the AMT changes in the Tax Cuts and Jobs Act (TCJA) of 2017. For example, starting in 2018, the TCJA triggered higher levels of AMT exemptions, and exemptions began to be phased out.

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