Form 6251: Alternative Minimum Tax—Individuals Definition

Form 6251: Alternative Minimum Tax—Individuals is a tax form the Internal Revenue Service (IRS) distributes and uses to determine the amount of alternative minimum tax (AMT) that a taxpayer may owe. Some taxpayers with higher incomes can claim certain deductions that allow them to reduce their regular tax obligation, and the AMT sets an upper limit on how much that deduction can be.

Form 1040 also contains a worksheet that allows a taxpayer to determine whether AMT is owed, but it only provides basic computations. Form 6251 is more detailed and will give a more accurate answer, and simply completing it does not mean that it has to be filed. The AMT requires affected taxpayers to calculate their tax bill under the ordinary income tax system and again under the AMT, paying the higher of the two amounts.

The AMT is a tax system parallel to the regular income tax. It went into effect for the 1970 tax year and was originally designed to identify and collect taxes owed by a limited number of wealthy individuals and families who were otherwise avoiding income taxes. It does this by limiting the number of itemized deductions that can be claimed by a taxpayer. Deductions for state and local taxes as well as personal exemptions are not allowed, while deductions for medical expenses are limited. In addition, taxpayers impacted by the AMT cannot take the standard deduction.

Each taxpayer must evaluate whether or not they must pay AMT each year. Depending on your income level, you may not need a separate calculation. The AMT is charged at two rates: 26 percent and 28 percent.

After calculating your AMT, you can claim the exemption based on your filing status. When you have completed the form, you can attach it to your tax return. If you owe any amount of AMT, you will need to transfer that amount. Only if there is AMT owed will Form 6251 have to be attached to Form 1040.

A lack of inflation adjustments caused the AMT to apply to a much larger group of taxpayers than originally intended. Congress had passed annual inflation adjustments to limit the reach of the AMT before instituting a permanent fix of indexing future exemption levels to inflation as part of the American Taxpayer Relief Act of 2012.

The AMT impacted 4.9 million tax returns in 2016 and collected $35.3 billion in revenue, according to estimates from the Tax Policy Center. Changes to the AMT that were part of the Tax Cuts and Jobs Act of 2017, however, should lower the number of tax returns impacted in 2018 to just 200,000.

Here is a link for a downloadable Form 6251: Alternative Minimum Tax—Individuals.