Overview

For Alternative Minimum Tax purposes, certain items of income, deductions, etc., receive different tax treatment than for the regular tax. They therefore may show different amounts than would display for regular tax.

For the regular tax, some deductions and credits may result in carrybacks or carryforwards to other tax years. Examples are investment interest expense, a net operating loss, a capital loss, a passive activity loss, and the foreign tax credit.

You may have to re-figure these items for alternative minimum tax purposes, the carryback or carryforward amount may be different for the AMT than for the regular tax. Your at-risk limits and basis amounts also may differ for the AMT.

If you owe AMT, you may be able to lower your total tax (regular tax plus AMT) by claiming itemized deductions on Form 1040 or Form 1040-SR, even if your total itemized deductions are less than the standard deduction. This is because the standard deduction is not allowed for the AMT and, if you claim the standard deduction on Form 1040 or Form 1040-SR, you cannot claim itemized deductions for the AMT.

Links

For more information about AMT see:

• Form 6251 Instructions

• Tax Topic 556 - Alternative Minimum Tax

Also see Drake Tax - 1040: Federal Taxation of State Refund and Prior-year AMT.

Calculating in Error

The most common cause of AMT being calculated when it should not be is a missing Date of birth on screen 1 in data entry. If the date of birth is entered, and the format is correct, it may be that information entered on the return is generating AMT. Review the following list to verify that none of these items are claimed on the return.

• Accelerated Depreciation

• Stock by exercising an incentive stock option and the stock was not disposed of in the same year

• Tax exempt interest from private activity bonds

• Intangible drilling, circulation, research, experimental or mining costs

• Amortization of pollution-control facilities or depletion

• Income (or loss) from tax-shelter farm activities or passive activities

• Income from long-term contracts not figured using the percentage-of-completion method

• Interest paid on a home mortgage NOT used to buy, build or substantially improve your home

• Investment interest expense reported on Form 4952

• Net operating loss (NOL) deduction

• Alternative minimum tax adjustments from an estate, trust, electing large partnership or cooperative

• Section 1202 exclusion

• Any general business credit in Part I on Form 3800

• Empowerment zone and renewal community employment credit

• Qualified electric vehicle credit

• Alternative fuel vehicle refueling property credit

• Credit for prior year minimum tax

Review entries on K1 screens (K1P, K1S, K1F). Entries on these screens may play a role in the calculation of AMT, in particular items entered for alternative minimum tax (line 17 on a K1P screen, line 12 on a K1F screen, and line 15 on a K1S screen). Capital gains, as figured in Part III of Form 6251, may also affect the assessment of AMT.

NOL

You may enter amounts needed to track the AMT portion of your NOL on the LOSS screen. This produces a worksheet titled Wks NOLA in View/Print mode.

Report

Go to Reports > Report Manager. You can either create a new report, or edit an existing one. The following example creates a new report.

1. Click New Report.

2. When the Specify Report Type window appears, select Tax return data and click OK.

3. On the Report Editor – Step 1 screen, key in a name for the report, for example: Clients with Alternative Minimum Tax.

4. Then, from Available Columns, select Alt Min Tax to establish a column in which to display the AMT amount. Select other desired columns, such as Taxpayer Name and Taxpayer ID to help identify the returns with Alt Min Tax.

5. Click Next when your selections are complete.

6. On the Report Editor – Step 2 screen click Edit Filters.

7. Click New Filter and enter a filter name, such as Alt Min Filter, and click OK. Make sure the new filter is highlighted in the list. (At this point, you can limit what kind of returns will be searched by clicking Edit under Basic Search Conditions for the Selected Filter. In this example, the default Return Type is 'Any' will be used. When the search is run, you again will have a chance to limit the return type.)

   Caution   If you modify an existing filter and save the changes, any other report that uses that filter will be affected. Generally, better practice is to set up a new filter for each report.

8. Click Add Condition to display the Filter Condition Editor. From the Keyword Name drop list, select Alt Min Tax, from the Comparison drop list select is at least, and in the Value field, enter 1 (or another value or combination of comparison and value that you prefer.)

   • If you use more than one Condition, consider what selection to make between Match All Conditions and Match Any Condition.

   • Click OK and Save to save the filter condition.

9. After creating or editing a report, click Save on the Report Editor – Step 2 screen to save the report.

10. The new report template will be saved in the Report Manager in the My Reports section.

11. Click View Report to generate the report.