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What is the Form 6251: Alternative Minimum Tax, Individuals?

IRS Link to Form — Found Here

The Form 6251 is used to calculate the alternative minimum tax (AMT) for individuals who may have high income but relatively low taxes due after deductions.

The individual first computes his or her adjusted gross income, which does not allow for some deductions that may have been taken for the tax filing. If the AMT is higher than the taxes already paid, the individual will have to pay the difference.

The AMT was instituted because some higher earners had found ways to get so many tax deductions that they weren’t paying any federal income tax. The AMT makes it much harder to do that by allowing for fewer possible deductions.

A person uses Form 6251 if their income is above average and they want to make sure they don’t owe anything additional for the Alternative Minimum Tax (AMT), which they will in many cases.

The calculation for AMT uses adjusted gross income (AGI), which does not allow for deductions for personal real estate property and state and local taxes, net operating losses, and miscellaneous deductions, and then applies a standard exclusion amount. The amount over the exclusion, which is about $54,000 for individuals and $84,000 for couples in 2016, will be subject to tax at regular income tax rates.

The taxpayer will have to attach their 6251 to their 1040 and pay the difference between what they had paid before and what is due according to the AMT. There also a section for calculating how much of a year’s capital gains taxes paid will be considered to be part of the excluded amount.

Keywords: tax deductible, phase-out, Adjusted Gross Income (AGI), Alternative Minimum Tax (AMT), high net worth individuals,