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ABOUT Jason

Jason has been involved in the financial services industry as an advisor and financial educator for more than ten years. Prior to joining Pure Financial Advisors, Jason taught in the Financial Planning program at the University of Redlands and helped design a similar program at Grantham University. He is especially happy to see former students [...]

While fewer people are going to pay the Alternative Minimum Tax going forward after the tax legislation took effect in 2018, there are a few situations that might make you want to take a look at your alternative minimum tax liability. But, what is the Alternative Minimum Tax?

In this video, Pure Financial Advisors’ Financial Educator, Jason Thomas, CFP® breaks down what the AMT is and lays out some situations that you might want to look at during the year.

Transcript:

Today we’re going to talk about the alternative minimum tax also known as AMT, or Alt Min. The Alternative Minimum Tax is a parallel tax system to the standard federal income tax. What this means is that the federal income tax is calculated and then in a separate procedure the alternative minimum tax is calculated. You don’t need to complete a different return it will all happen on your 1040. You will pay the higher of the two.

The reason the alternative minimum tax came into being was that in 1969 legislators determined that certain taxpayers with very high gross incomes were paying very little if any, federal income tax because of the amount of deductions that they had available to them. Many more people eventually paid the alternative minimum tax because of infrequent adjustments for inflation in the law. However, the tax legislation that took effect in 2018 means that many fewer people will pay the Alternative Minimum Tax going forward. Nonetheless, this could be you. So here are some of the situations that might make you want to look at your alternative minimum tax liability during the year.

First of all, anyone who has paid the alternative minimum tax in the recent past should look at their activity during the current tax year as well to see if they may be liable for it going forward.

Also, those with high incomes in general, especially those that have a lot of their income from stock dividends and long-term capital gains or stock option activity, should look at their tax liability during the year to see if they may be likely to pay the Alternative Minimum Tax going forward and potentially shift strategies if that is likely to be the case.

These are only a few situations that might cause someone to want to take a look at their alternative minimum tax liability but as a rule of thumb with so many changes in 2018 you might want to look at your overall tax situation with a bit of a finer comb this year and have that conversation with your financial professional.

If you need any more information, please visit us at PureFinancial.com. Thanks for watching today.

Click here to listen to our podcast for more ways to save on your taxes.