Alternative Minimum Tax (AMT)

Effective 2012 and beyond the ARTA permanently patches AMT

The American Taxpayer Relief Act (ARTA) permanently patches the AMT by giving taxpayers higher exemption amounts and other targeted relief. This relief is available beginning in 2012 going forward. The permanent patch is expected to provide some certainty to planning for the AMT.

The "patched" exemption amounts for 2012 are $50,600 for single individuals and heads of household; $78,750 for married couples filing jointly and qualifying widow(er)s; and $39,375 for married couples filing separately.

The alternative minimum tax (AMT) foreign tax credit may be claimed by taxpayer’s in computing their tentative minimum tax. The AMT foreign tax credit is similar to the foreign tax credit for regular income tax purposes, except that it is limited to the foreign tax on foreign source alternative minimum taxable income (AMTI) instead of foreign tax on regular taxable income.

Thus, the AMT foreign tax credit cannot exceed the taxpayer’s tentative minimum tax multiplied by the ratio of the taxpayer’s foreign source AMTI to worldwide AMTI. Alternatively, the taxpayer may elect to compute the AMT foreign tax credit limit by multiplying the tentative minimum tax by the ratio of the taxpayer's foreign source regular taxable income to worldwide AMTI.

Amounts disallowed by the foreign tax credit limitation may be carried back two years and forward five years, subject to the same limitation in those years for both regular tax and AMT purposes.