Sunday, February 27, 2022

读书笔记 - 100 African-Americans who shaped American history


Monday, February 21, 2022

AMT 101

Why AMT?
Under the tax law, certain tax benefits can significantly reduce a taxpayer's regular tax amount. The alternative minimum tax (AMT) applies to taxpayers with high economic income by setting a limit on those benefits. It helps to ensure that those taxpayers pay at least a minimum amount of tax. In a nutshell, AMT was designed to keep wealthy taxpayers from using loopholes to avoid paying taxes.

What triggers AMT?
The three main triggers of AMT are having high household income with a significant number of deductions, realizing a large capital gain, or most commonly exercising stock options. 

How to calculate AMT?
When calculated AMT, your taxes are calculated in two ways: 1) Standard Tax and 2) Alternative Minimum Tax - if your Alternative Minimum Tax calculation is higher than the Standard Tax version, you will owe AMT. Again, one of the most likely scenarios where your AMT exceeds your Standard Tax is after ISO exercise. No AMT adjustment is required if you dispose of the stock in the same year you exercise the option.

How to get AMT credit?
If you're not liable for AMT this year, but you paid AMT in one or more previous years, you may be eligible to take a special minimum tax credit against your regular tax this year.

If you pay AMT after exercising ISOs, you will receive an AMT credit that can be used to lower your future tax bills. In order to claim your AMT credit, you will need to file IRS form 8801. You are only able to claim AMT Credits based on the difference between your Standard Tax and Alternative Minimum Tax in any given year.

For current tax year, first, there must be regular capital gains. Second, regular tax must be higher than AMT tax. Create a bigger gap between regular and AMT simply because the top rates for regular and AMT are 37% and 28% respectively. See below example:

Let's say you exercised ISOs in 2020 and your AMT exceeded your Standard Tax by 50,000, meaning you owed $50,000 in AMT in April 2021 (for tax year 2020). If your 2021 Standard tax exceeds your 2021 AMT by $30,000 you will be able to claim $30,000 in AMT Credit for 2021, leaving the remainder for 2022 and on.