AMT

[AlmostDone]

This is a new one for me. I put some money into the VG tax exempt money market fund. On the 1099, there is an entry for $242.63 of interest from specified private activity bonds exempt from regular tax. I started researching to see what that is, and it looks like it means we have to fill out form 6251 to see if we owe the AMT. Is that correct?

[LOL!]

Only a small percentage of folks fill out forms anymore. The vast majority of folks use a tax software program which will check for AMT for you. So the answer to your question is no, you do not have to fill out form 6251. Let TurboTax or some other program do it for you.

[Animorph]

I've never had to worry about this personally, but not all tax-free funds are AMT tax free. So you may very well have to include some of that as income for AMT. A few funds do specify that they are AMT tax-free as well.

Dan

[retire@40]

Originally Posted by LOL!

Only a small percentage of folks fill out forms anymore. The vast majority of folks use a tax software program which will check for AMT for you. So the answer to your question is no, you do not have to fill out form 6251. Let TurboTax or some other program do it for you.

And then the next question is, "Did the software give me the correct answer?"

[audreyh1]

That's right. $243 is not much, and unless something else is causing you to pay AMT, you probably won't owe taxes on that money. But the only way to know is to fill out form 6521.

As LOL said, if you are using a tax program, it is probably already doing that check for you provided you know exactly where to enter that number.

If it's Turbotax pull up form 6521 and see if the entry is there for "private activity bond interest" - sorry I don't which line, but it should be on the first page of the form.

Audrey

[LOL!]

Originally Posted by retire@40

And then the next question is, "Did the software give me the correct answer?"

Well, I think that's better than the questions "Did I give me the correct answer?" or even "Did my tax professional give me the correct answer?"

[CyclingInvestor]

Originally Posted by AlmostDone

This is a new one for me. I put some money into the VG tax exempt money market fund. On the 1099, there is an entry for $242.63 of interest from specified private activity bonds exempt from regular tax. I started researching to see what that is, and it looks like it means we have to fill out form 6251 to see if we owe the AMT. Is that correct?

Private activity munis count towards AMT income, even though they do not
count towards AGI for regular federal tax. This does not mean you owe AMT,
just that you are more likely to (or will owe a bit more if you are already in
the AMT zone)

[AlmostDone]

Thank you all. The $242.63 would be the only reason to fill out the form. I guess I'll fill it out to have the experience.

[firewhen]

Technically everyone could owe AMT. The tax system is basically two tiered: regular rates and AMT. You are supposed to calculate your taxes both ways and pay the higher of the 2. As was said already, the $242 will not change it much, but if you are in the AMT range, this amount will be added to your income and be taxed at 26%, when it otherwise would have been tax free.

Some of the major triggers for AMT are taxes (state and local income tax and property tax) and personal exemptions. This are added back to your income for the AMT calculation.