With so many exclusions and deductions, many expats do not have to worry about owing the IRS anything on their overseas tax return. In order to ensure that individuals do not abuse deductions and credits, the IRS has the Alternative Minimum Tax in place. The IRS recently released six facts individuals should know about the Alternative Minimum Tax. As many of our overseas tax return clients are subject to the AMT, we wanted to point out a few facts that everyone should know about the Alternative Minimum Tax.
What is the AMT?
The Alternative Minimum Tax was created by the IRS in 1969 to target higher-income taxpayers who were eligible to take multiple deductions to drastically lower or completely eliminate their tax liability. In order to combat this, the IRS introduced an “Alternative Minimum Tax” to limit the abuse of excessive deductions and credits.
The AMT is not indexed for inflation
Unlike many other aspects of taxation, the IRS does not adjust the AMT for inflation. This has caused many middle-class taxpayers to find that they are subject to the Alternative Minimum Tax. This is particularly true for those filing an overseas tax return due to the additional deductions and credits that expats can apply to their US taxes.
What exemptions can I expect to take under the Alternative Minimum Tax on my Overseas Tax Return?
The IRS has different exemption rates for each filing status. If you have found that you are liable for the Alternative Minimum Tax, you are going to be eligible to take the exemptions and standard deductions that are assigned to your filing status. The exemptions were last updated in 2011, and are currently
- $74,450 for a married couple filing a joint return and qualifying widows and widowers;
- $48,450 for singles and heads of household;
- $37,225 for a married person filing separately.
More Information on the Alternative Minimum Tax
- Read the entire IRS press release “Six Facts the IRS Wants You To Know About the Alternative Minimum Tax“.
- Read more about the necessary documents for an overseas tax return.