Can hourly wages alone trigger the alternative minimum tax?

July 16, 2001

Subject:  AMT info
Date:  Thu, 19 Oct 2000
From:  Twomblies

Hi,

I enjoyed looking at your website. I'm looking for info on the Alternative minimum tax. I was under the impression this tax was created for people with substantial income. Our families' only source of income is our hourly wages earned. When we filed in 1998 as married filing separately, we were reassessed using the AMT. As a family of seven (5 kids) living just north of Boston making less than fifty thou a year this seems ridiculous to me.

Our real estate taxes and personal deductions were disallowed and that rendered us vulnerable to the AMT.

Under the tax code, Section 151, d,(3),c, iv I read that "the threshold amount of income for an individual married filing separately [for personal deductions) is $75,000."

Section 164 of the code it states that "the following taxes shall be allowed as a deduction for the year in which paid....real estate taxes...unless otherwise stated in this section."

In light of these excerpts from the Code, how can I be subject to the AMT? Did I score a dork for an examiner or am I misreading the Code? Thanks for listening, Twomblies

Answer

Date:  04 Dec 2000

Hello Twomblies,

Sorry about your experience, but you really can be subject to AMT in your situation.

See Internal Revenue Code Section 55.

Among the items disallowed as deductions for the AMT are personal exemptions, the state tax deduction, mortgage interest unrelated to the purchase or improvement of the principal residence or a second residence, and the standard deduction. As a result, many people with large families and people with large long-term capital gains are finding themselves subject to the AMT.

Always complete the AMT form, even if you don't think it will apply, because you could be wrong.

Good luck!
Mike Gray

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