Itemized Deduction Limitation
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Question: When calculating AMTI, individual taxpayers must add back the following: I. Miscellaneous Itemized Deductions?
When calculating AMTI, individual taxpayers must add back the following: I. Miscellaneous itemized deductions subject to the 2% limitation. II. Personal exemption amounts
Answer: When calculating AMT (alternative minimum tax) you start with the amount on your 1040 page 2…after itemized deduction amounts are subtracted from AGI (adjusted gross income.) Then you must add back to that number, preference items from your Sch. A, itemized deductions. Preference items consist of any Medical Expense Deductions on line 4 , “taxes paid” amounts on line 5, 6 & 7 (state tax withheld or sales tax deduction, real estate taxes paid and DMV or personal taxes paid and if you have it, luxury tax). Skip mortgage interest and charitable deductions, they get to stay in as long as your mortgage interest amounts are secured by your primary residence and don’t exceed1,000,000. If you entered unreimbursed mileage amounts etc. on Form 2106 (whose amount flows through to the Sch. A), that gets added back in to income (AGI) as does fees for tax preparation, safety deposit boxes, investment expenses taken and all amounts of employee expense, like union dues and education. There are amounts however, which you may then subtract out of your new AMTI that were taken from AGI before the AMT calculation. Items you may subtract from the new number are State refund amounts, unemployment, taxable social security etc. Odd isn’t it?
Now calculate your NEW amount of income; AGI – certain itemized deductions = AMTI (alternative minimum taxable income). AMTI + taxes + unreimbursed employee expenses etc.- state refund – unemployment – taxable social security = new income or AMTI.
This new income number that you’ve arrived at, then has another number subtracted from it, based on your filing status single, head of household [42,500], married filing joint, QW [62,550] & MFS [32,175]). The result = the amount of income you made over the “national average” that is now subject to additional taxation of either 26% or 28%.
The AMT calculation is extreemly difficult and should not be attempted by unsuspecting taxpayers. Please see a tax professional, like an Erolled Agent, in your area for assistance if you believe you might fall victim to AMT amounts.
If you are a high income earning family or have extreemly large amounts of tax, medical, employee expenses not reimbursed, large # of mileage and make alot of money; you may find yourself attempting the mind boggling calculations of Form 6251 for Alternative Minimum Tax.
Good Luck! If you are going this alone or with standard tax software…be prepared to spend days recomputing income, expense, exemptions, allocation, depreciation etc. the list is endless.
Items on Amazon Right Now for Itemized Deduction Limitation:
Miller introduces Gulf Opportunity Zone legislation for oil impacted Gulf Coast
WASHINGTON, D.C. — U.S. Representative Jeff Miller (R-FL-01) Thursday introduced legislation creating a Gulf Opportunity Zone (GO Zone) for areas along Gulf Coast impacted by the ongoing Deepwater Horizon oil leak.
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