Welcome to Curt's Chalk Talk, The Executive Acronym series. I'm Curt Sheldon, with C.L. Sheldon and Company and today we're going to talk about the AMT. AMT stands for the Alternative Minimum Tax.
Now, under the TCJA, the Tax Cuts and Jobs Act, otherwise known as the New Tax Law, a whole lot fewer of you are going to be subject to AMT, but that tax law is scheduled to sunset in 2025. So what is the AMT? AMT is a flat tax for those of you who would like one, to make sure the rich pay their fairest share of taxes.
So when calculating AMT after taking an exemption, all your income is subject to either a 26 or 28% tax rate. There is no graduation below that, everything is taxed at the same rate. Now as I mentioned, most of you will not be subject to the AMT because a lot of the things that were called preference items were eliminated under the Tax Cuts and Jobs Act, but things that could make you likely to pay AMT in the future are having incentive stock options, because they are such a special tax treatment. If you pay a lot in state and local income taxes, you're likely to be subject to AMT. If your family is large, you're more likely to be subject to AMT and if you have a lot of miscellaneous itemized deductions, you're more likely to be subject to the AMT. Again, this will occur after 2025.
Unless you have incentive stock options, right now, you can probably relax a little bit about the AMT, you probably won't have to worry about it, but it's still out there on the horizon.
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