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 Topic: A.M.T Itemized deductions ( Topic Closed)
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cpacand
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| Posted: 30 Dec 2009 at 12:10 | IP Logged
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cpa0123
thanks a lot for ur help
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cpacand
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| Posted: 30 Dec 2009 at 12:29 | IP Logged
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In 20X4, Don Mills, a single taxpayer, had $70,000 in taxable income before personal exemptions. Mills had no tax preferences. His itemized deductions were as follows:
State and local income taxes $5,000
Home mortgage interest on loan to acquire residence 6,000
Miscellaneous deductions that exceed 2% of adjusted gross income 2,000
What amount did Mills report as alternative minimum taxable income before the AMT exemption?
Solution: Mills' alternative minimum taxable income starts with his taxable income ($70,000). This is increased by state and local taxes paid ($5,000) and miscellaneous deductions that exceed 2% of adjusted gross income ($2,000) for a total of $77,000. The home mortgage interest on a loan to acquire the residence ($6,000) does not increase alternative minimum taxable income
My doubt is what items are included under A.M.T itemized deduction ,as in this que they are taking state and local income tax and misc. deductions but in the previous que they ignore these two items.
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cpacandidate
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cpa0123
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| Posted: 30 Dec 2009 at 13:39 | IP Logged
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cpacand wrote:
In 20X4, Don Mills, a single taxpayer, had $70,000 in taxable income before personal exemptions. Mills had no tax preferences. His itemized deductions were as follows:
State and local income taxes $5,000
Home mortgage interest on loan to acquire residence 6,000
Miscellaneous deductions that exceed 2% of adjusted gross income 2,000
What amount did Mills report as alternative minimum taxable income before the AMT exemption?
Solution: Mills' alternative minimum taxable income starts with his taxable income ($70,000). This is increased by state and local taxes paid ($5,000) and miscellaneous deductions that exceed 2% of adjusted gross income ($2,000) for a total of $77,000. The home mortgage interest on a loan to acquire the residence ($6,000) does not increase alternative minimum taxable income
My doubt is what items are included under A.M.T itemized deduction ,as in this que they are taking state and local income tax and misc. deductions but in the previous que they ignore these two items. |
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Both State & local income taxes, and misc deductions are not deductible for AMT calculations. The reason why they are added back is because $70,000 is the gross 'regular' taxable income. $70,000 is NOT book income as that is what is usually given in the questions. So in order to arrive at book income, they have added back these amounts.
Book income = 70,000+5,000+2,000+6,000=83,000
Regular taxable income = 70,000 (given)
AMT taxable income = 83,000-6,000=77,000 (only 6,000 is allowed as deduction)
For AMT deductions, only charitable contributions, home mortgage interest and medical exp (excess of 10% of AGI) are allowed. Normally you are asked to arrive at taxable income from book income. Here, they have given regular taxable income & asked for AMT taxable income. That's the difference. You don't add back $6,000 since this is an allowed deduction in both regular & AMT calculations.
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cpacand
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| Posted: 30 Dec 2009 at 15:09 | IP Logged
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Wow!! I got it .... Thanks :)
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