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What is Form 6251: Alternative Minimum Tax

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Form 6251 AMTForm 6251: Alternative Minimum Tax (Individuals) is the form taxpayers must fill out to determine whether or not they are subject to the dreaded Alternative Minimum Tax (AMT). The AMT is another way of calculating your tax liability and those subject to its wrath will see their tax liability increase, as certain deductions are disallowed under AMT.

As scary as the AMT itself is, the form is only two pages with 54 “questions.”

Simple, right?

Who Has to File Form 6251?

Technically, everyone. Sorry to be the bearer of bad news. :(

Everyone is required to fill out Form 6251 to determine whether AMT applies or not. Fortunately for those who file their taxes electronically with the help of software, the software should calculate this for you. You may be subjected to AMT but you won’t be subjected to the fun and enjoyment of filling out Form 6251! If you are opting to do it by hand, I recommend using the IRS’s 2010 AMT Assistant because it’ll tell you in 5-10 minutes whether or not you need to fill out Form 6251. In order to use this tool, you’ll have to have a draft of your 2010 tax return completed through Line 44, which is where you enter this information.

I can save you a bit of time though, if you claimed or received any of the following, the IRS will want you to fill out Form 6251:

  • Accelerated Depreciation
  • Stock by exercising an incentive stock option and you did not dispose of the stock 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 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

If you didn’t, then it comes down to some other factors and for that you’ll have to use the AMT Assistant.

Why AMT Sucks

It sucks because it excludes certain deductions and thus increases the tax liability of anyone subjected to AMT. It was intended to affect only the wealthiest of taxpayers but when it was created, they forgot to index for inflation. As a result, more and more taxpayers get caught up in the AMT and Congress, rather than dealing with it, simply pass adjustments that reduce the number of people affected.

You might be surprised that AMT was originally created to target 155 high-income households, according to Wikipedia, and it’s affecting far greater numbers today.

Hopefully you won’t get caught up by AMT, unfortunately the only way to know is by filling out Form 6251.

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12 Responses to “What is Form 6251: Alternative Minimum Tax”

  1. zapeta says:

    Maybe someday they’ll actually fix the tax code rather than kicking the can to next year. I don’t have a problem with the AMT but obviously if it was intended to capture 115 households originally it has gone off the rails completely.

  2. NCTaxPro says:

    Expecting Congress to fix the tax code is like expecting the sun to rise in the west; barring an act of God it’s not going to happen.

  3. Strebkr says:

    I am ok with them passing temporary acts to up the limit on this. But I think they need to double the limit first. Its getting very close to the average people. Not the 155 it was designed to hit.

  4. freeby50 says:

    Theres a lot of unwarranted fear about the AMT. Only a few % of people pay it and they’re mostly very high income earners.

    If they just slap an inflation adjustment on the exemption it will be fixed forever. A simple straight forward fix. Theres already inflation adjustment to the standard deduction and exemptions. Easily doable.

    A lot of people can easily tell that they won’t be impacted by AMT without filling out any forms. The exemption is $72,450 for married couples filing jointly or a qualified widower, $36,225 for married individuals filing separately, $47,450 for singles. If you make less than that then you are not going to be impacted by AMT. Over 1/2 of filers make less than the exemption.

    • Shirley says:

      The exemption is $72,450 for married couples filing jointly… I wouldn’t consider this a “very high” income.

      I do agree with you that an inflation adjustment on the exemption would seem to be an easy fix.

      • Strebkr says:

        I have to agree with Shirley. 74k is not very high at all. With two working adults 74 isn’t that hard to hit. I would no way consider myself a high earner.

      • mikestreb says:

        The exemptions is pretty low if you ask me. I prepare just shy of 500 tax returns a year and have yet to have a single person hit AMT. Married couple making $165k came close, but still did not reach it.

  5. govenar says:

    I hear a lot about AMT, but the things listed here don’t seem very common. What are the other things that make AMT apply to a lot of people? (Is it mostly just real estate investors?)

    • Strebkr says:

      I think the Passive Activity Losses from real estate is one of the more common items for people who rent out a house or something like that. There are a few other items on there that would hit business owners. You would be surprised how many people own businesses and see real benefits from some of those deductions.

      • mikestreb says:

        PAL is a pain… in MOST situations, as long as your passive rental activities don’t lose more than $25,000 then you don’t have to worry to much about it.

    • Texas Wahoo says:

      You don’t have to have one of those things listed to be hit by the AMT. It is just that if you ahve one of those things, you automatically have to fill out the form. You might have to fill it out anyway. For example, my wife and I have none of those things, but we ended up getting hit with the AMT this year.

      It often applies to people who have somewhat high incomes in high income tax states because the AMT does not allow a deduction for state taxes.


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