AMT Difference

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Subject Author Date AMT Difference R. Pile 06-22-2009  Re: AMT Difference Arthur Kamlet 06-22-2009  Re: AMT Difference R. Pile 06-24-2009  Re: AMT Difference Mark Bole 06-24-2009  Re: AMT Difference Arthur Kamlet 06-24-2009
Posted by R. Pile on June 22, 2009, 5:14 pm Please log in for more thread options Just completed a 2008 return for an individual who had higher-than- usual itemized deductions, including medical, taxes and mortgage interest. The deductions totaled over $40,000 on an AGI of just over $100,000. The tax software computed an AMT amount of $1,400. The calculations on Form 6251 appear correct. On the IRS website I plugged in the numbers on its "AMT worksheet" and it told me that no AMT was due. This is a large discrepancy; has anyone else experienced this or have any explanation for the difference? -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Arthur Kamlet on June 22, 2009, 5:31 pm Please log in for more thread options > >Just completed a 2008 return for an individual who had higher-than- >usual itemized deductions, including medical, taxes and mortgage >interest. The deductions totaled over $40,000 on an AGI of just over >$100,000. > >The tax software computed an AMT amount of $1,400. The calculations >on Form 6251 appear correct. On the IRS website I plugged in the >numbers on its "AMT worksheet" and it told me that no AMT was due. > >This is a large discrepancy; has anyone else experienced this or have >any explanation for the difference? But as I recall that website does say if any of a list of things apply, file form 6251 and see where it takes you? If you did the form 6251 correctly, it should generate correct answers. For example, when you entered the mortgage interest item, did you tell the software this was acquisition debt or home equity debt, as applies to your specific situation? Nothing on the 1098 form you received which reported the interest tells you that, so you have to know what to tell your software. Look at every line of the 6251 and see if you agree with their figures. If not, perhaps something was entered wrong. Remember, tax software is a valuable tool that can speedup tax preparation if used correctly, in the same way that a blowtorch and a chainsaw are valuable tools. -- ArtKamlet at a o l dot c o m Columbus OH K2PZH -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by R. Pile on June 24, 2009, 7:20 pm Please log in for more thread options > > For example, when you entered the mortgage interest item, did > you tell the software this was acquisition debt or home equity > debt, as applies to your specific situation? Nothing on the > 1098 form you received which reported the interest tells you > that, so you have to know what to tell your software. > > Look at every line of the 6251 and see if you agree with their > figures. If not, perhaps something was entered wrong. > > Yes, once I correctly designated about 80% of the mortgage interest as acquisition debt and the balance as equity debt, the AMT disappeared. Thanks for your help. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Mark Bole on June 24, 2009, 8:30 pm Please log in for more thread options R. Pile wrote: >> For example, when you entered the mortgage interest item, did >> you tell the software this was acquisition debt or home equity >> debt, as applies to your specific situation? Nothing on the >> 1098 form you received which reported the interest tells you >> that, so you have to know what to tell your software. >> >> Look at every line of the 6251 and see if you agree with their >> figures. If not, perhaps something was entered wrong. >> >> > > Yes, once I correctly designated about 80% of the mortgage interest as > acquisition debt and the balance as equity debt, the AMT disappeared. The AMT never really "disappears" but it can drop below the regular tax. Your example is a little counter-intuitive, as equity debt is *not* deductible for AMT purposes (the terminology isn't exactly right, but that's the basic idea). So by designating some mortgage interest as non-acquisition, it should have made your AMT itemized deduction smaller, and your AMT even larger. You may however have entered the original amounts in such a way that your regular tax was being under-calculated. -Mark Bole -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Arthur Kamlet on June 24, 2009, 10:41 pm Please log in for more thread options >R. Pile wrote: >>> For example, when you entered the mortgage interest item, did >>> you tell the software this was acquisition debt or home equity >>> debt, as applies to your specific situation? Nothing on the >>> 1098 form you received which reported the interest tells you >>> that, so you have to know what to tell your software. >>> >>> Look at every line of the 6251 and see if you agree with their >>> figures. If not, perhaps something was entered wrong. >>> >>> >> >> Yes, once I correctly designated about 80% of the mortgage interest as >> acquisition debt and the balance as equity debt, the AMT disappeared. > > >The AMT never really "disappears" but it can drop below the regular tax. The way AMT is used on the forms themselves, AMT is tentative minimum tax less regular income tax (adjusted by some form 4972 tax, schedule J and foreign tax credits). It the additiional amount that flows to 1040 line 45. >Your example is a little counter-intuitive, as equity debt is *not* >deductible for AMT purposes (the terminology isn't exactly right, but >that's the basic idea). So by designating some mortgage interest as >non-acquisition, it should have made your AMT itemized deduction >smaller, and your AMT even larger. > >You may however have entered the original amounts in such a way that >your regular tax was being under-calculated. I read this as saying that initially all of the mortgage interest was incorrectly characterized as HEL, and after making only 20% HEL, that Line 45 AMT figure dropped to zero. -- ArtKamlet at a o l dot c o m Columbus OH K2PZH -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted BIG Difference in some numbers from '05 to '06 January 21, 2007, 4:18 pm Re: 401K vs IRA maximum annual contribution limit difference April 11, 2006, 3:31 am Re: 401K vs IRA maximum annual contribution limit difference April 14, 2006, 4:04 am difference between adding short dividends to cost basis or investment interest January 22, 2008, 5:41 pm