Question

In 2019, Janet and Ray are married filing jointly. They have five dependent children under 18 years of age. Janet and Ray’s taxable income is $2,400,000, and they itemize their deductions as follows: state income taxes of $10,000, and mortgage interest expense of $25,000 (acquisition debt of $300,000). Use Exhibit 8-5. and Tax Rate Schedule for reference. a. What is Janet and Ray’s AMT?

Answer 1

AMT
Description	Amount	Reference
(1) Regular taxable income	$2,400,000
(2) State income taxes	10,000
(3) AMTI	$2,410,000	(1)+ (2)
(4) Full exemption	111,700	Exemption amount for Married filing and jointly
(5) Phase-out of exemption	111,700	([(3) – 1,020,600] × 25%), limited to $111,700
(6) AMT exemption	0	(4) – (5)
(7) AMT base	$2,410,000	(3) – (6)
(8) AMT rate	26% and 28%	26% on first $194,800 of AMT base and 28% on AMT base in excess of $194,800
(9) Tentative minimum tax	$ 670,904	$194,800 x 26%= $50,648; ($2,410,000- $194,800) x 28%= $2,215,200X28% = 620,256
(10) Regular tax liability	$ 829,840	(2,410,000 – 612,350) × 37% +164,709.5 = 665,130.5 + 164,709.5
AMT	$0	(9) – (10). If negative Zero

Notes for AMT calculation

1. The AMT exemption amount for married filing jointly in year 2019 is $ 111,700
2. AMT exemptions phase out 25 cents per dollars earned once taxpayer earns certain threshold. For married and joint filing, the phaseout starts at $ 1020,600 but the whole exemption is limited to 111,700 only.
3. The rates of AMT are 26% and 28%. Higher rate applies above $ 194,800.
4. Regular tax liability is calculated using Tax brackets and rates for married individuals filing joint returns.

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