Form 6251, Alternative Minimum Tax - Individuals | Line Items That Increase or Decrease AMT Liability
Hi everyone. My name is Tan and I am an independent Certified Financial Planner Practitioner at TAN Wealth Management. In today’s educational video, I want to go through Form 6251, line 2c to 2t, so we can see which line item increases or decreases AMT liability.
For example, Luna is single and she is a California resident.
The Federal’s standard deduction is $12,950.
The California's standard deduction for state income taxes is $5,202.
Her salary is $150,000
Does the following line item increase or decrease AMT liability
2c Investment Interest Expense
—Positive = Increase
—Negative = Decrease
Investment interest expense (difference between regular tax and AMT)
2d Depletion
—Positive = Increase
—Negative = Decrease
Depletion (difference between regular tax and AMT)
2e Net Operating Loss Deduction
—Positive = Increase
—Negative = Decrease
2f Alternative Tax Net Operating Loss Deduction (negative)
—Positive = Increase
—Negative = Decrease
2g Interest from Private Activity Bonds
—Positive = Increase
—Negative = Decrease
2h Qualified Small Business Stock
—Positive = Increase
—Negative = Decrease
2i Incentive Stock Options
—Positive = Increase
You don’t get a negative number because you won’t exercise the ISOs if the fair market value is lower than the strike price. You can buy the shares for cheaper in the open market. The stock price decreases below the exercise price after you exercise in-the-money ISOs is a different topic.
2j Estates and Trusts
—Positive = Increase
—Negative = Decrease
2k Disposition of Property
—Positive = Increase
—Negative = Decrease
2l Depreciation Post-1986 Assets
—Positive = Increase
—Negative = Decrease
2m Passive Activities
—Positive = Increase
—Negative = Decrease
2n Loss Limitations
—Positive = Increase
—Negative = Decrease
2o Circulation Costs
—Positive = Increase
—Negative = Decrease
2p Long Term Contracts
—Positive = Increase
—Negative = Decrease
2q Mining Costs
—Positive = Increase
—Negative = Decrease
2r Research and Experimental Costs
—Positive = Increase
—Negative = Decrease
2s Income From Pre-1987 Installment Sales (negative)
—Positive = Increase
—Negative = Decrease
2t Intangible Drilling Costs Preference
—Positive = Increase
—Negative = Decrease
Besides understanding Form 6251, line 2c to 2t, we should also know about other adjustments, AMT foreign tax credit, and foreign tax credit.
3 Other Adjustments
—Positive = Increase
—Negative = Decrease
8 AMT Foreign Tax Credit
—Positive = Decrease
Schedule 3 Foreign Tax Credit
—Positive = Decrease
Please note that this material is for educational use only and it’s subject to change. Tax laws are complex, there are exceptions to the rules, and it’s constantly changing. Be sure to talk to a qualified professional before making an informed decision. Thank you for watching. Until next time. This is Tan, your Trusted Advisor.