Minimum tax definition

A tax in the United States intended to be levied on very wealthy persons who are eligible for so many deductions that they would otherwise have little or no tax liability. The AMT recalculates income tax after adding certain tax preference items back into adjusted gross income. AMT uses a separate set of rules to calculate taxable income after allowed deductions. English dictionary definition of minimum tax. AMT A federal tax on taxable income that applies if deductions and adjustments to income reduce the standard income tax that one owes to an amount.

The alternative minimum tax is a tax imposed by the United States federal government in addition to the regular income tax for certain individuals , estates , and trusts.

It helps to ensure that those taxpayers pay at least a minimum amount of tax. It gets triggered when taxpayers make more than the exemption and use many common itemized deductions. The exemption is $104for joint filers and $73for individuals.

Although this credit arises due to the payment of AMT, the credit is regular tax credit and a taxpayer can only use it to offset regular tax. AMT adds back specific tax -exempt items into the personal tax calculation. But because it was not automatically updated for inflation, more middle-class taxpayers were getting hit with the AMT each year.

Interest from private. The tax -exempt article is not part of any tax calculations.

In reality, the AMT can hit some middle-income taxpayers, too. Simply put, the alternative minimum tax is a parallel system that taxes all income over a personal exemption by a set percentage. That sai because of the lack of updates and lack of deductions. The AMT’s purpose is to ensure everyone pays a minimum amount of tax.

Later in this article we will discuss the reasons to file a tax return even when it is not required. There is not a set minimum income for filing a return. The amount varies according to both filing status and age. The minimum taxable income level for each group is listed in the following chart. Minimum Income Requirements Based on Age and Status.

What is alternative minimum tax ? If your income falls below what is listed for your age group and marital status, you are not required to file a return. The AMT takes out various tax preferential items that an individual may receive, which lowers his taxable income. The AMT calculations limit certain tax benefits for some taxpayers so that their income tax liabilities are higher.

GROSS PROFIT This is the net turnover less the cost of sales reported in the account. In other words, this is the traditional accounting gross profit. But for the purpose of determinig the minimum tax , the other incomes derived outside the normal line of trade or business are to be aggregated to the gross profits,. S corporations, LLCs, and partnerships.

In addition to the latter taxes, if income from your business passes through to you personally, that income will be subject to taxation on your personal state tax return.

Under United States tax law, the standard deduction is a dollar amount that non-itemizers may subtract from their income before income tax (but not other kinds of tax , such as payroll tax ) is applied. Taxpayers may choose either itemized deductions or the standard deduction, but usually choose whichever in the lesser amount of tax payable. Paying estimated tax.

If your corporation reasonably expects to owe more than $0in franchise tax after credits, you must file estimated tax forms (Form CT-40 Estimated Tax for Corporations) and make quarterly payments of all estimated tax due. Most general business corporations are mandated to e-file the estimated tax.