As we gear up for the tax season in 2024, it's crucial to stay informed about any changes that may impact your financial picture. One area that often undergoes adjustments is the Alternative Minimum Tax (AMT). The AMT is a parallel tax system designed to ensure that high-income individuals, corporations, and trusts pay at least a minimum amount of tax, regardless of deductions and credits. Let's delve into the changes for 2024 and understand how they might affect your tax liability.
Overview of the Alternative Minimum Tax:
The Alternative Minimum Tax was introduced to prevent taxpayers with substantial deductions and credits from avoiding federal income tax entirely. It achieves this by calculating taxable income differently from the regular tax system. If your AMT liability is higher than your regular tax liability, you must pay the AMT.
Changes for 2024:
For the tax year 2024, the AMT exemption amount sees an increase to $85,700. This is a notable uptick from the 2023 exemption amount of $81,300. The exemption amount is the income level below which a taxpayer is not subject to the AMT.