Understanding the Alternative Minimum Tax (AMT)
Order ID |
53563633773 |
Type |
Essay |
Writer Level |
Masters |
Style |
APA |
Sources/References |
4 |
Perfect Number of Pages to Order |
5-10 Pages |
Description/Paper Instructions
Understanding the Alternative Minimum Tax (AMT)
The Alternative Minimum Tax (AMT) is a separate tax system that was created to ensure that high-income taxpayers pay at least a minimum amount of tax. The AMT operates parallel to the regular tax system and requires taxpayers to calculate their tax liability twice, once under the regular tax system and once under the AMT system. The taxpayer must pay the higher of the two amounts.
The AMT system disallows many of the deductions and credits allowed under the regular tax system, such as the deduction for state and local taxes, personal exemptions, and certain itemized deductions. This often results in a higher tax liability for those who are subject to the AMT.
Who is Subject to the AMT? The AMT affects a relatively small number of taxpayers, but it disproportionately affects high-income taxpayers. The AMT has two main components, the exemption amount and the tax rate. The exemption amount is the amount of income that is exempt from the AMT and is subject to inflation indexing. The tax rate is a flat rate of 26% or 28%, depending on the amount of taxable income.
The AMT is triggered when a taxpayer’s taxable income, after subtracting the AMT exemption amount and adding back certain deductions disallowed under the AMT, exceeds a certain threshold. The threshold is higher for taxpayers who are married and file jointly and for those who have a larger number of dependents.
Impact of the AMT: The impact of the AMT can be significant, particularly for taxpayers with a high taxable income and a large number of itemized deductions. For example, a taxpayer with a high state tax bill, a large mortgage, and a high number of dependents may find that their tax bill is significantly higher under the AMT than under the regular tax system.
The AMT can also have an impact on taxpayers who receive certain types of income, such as incentive stock options (ISOs). The AMT disallows the favorable treatment of ISOs under the regular tax system, which can result in a higher tax bill for those who exercise their options.
Relief from the AMT: There are several ways to reduce the impact of the AMT, including:
- Reducing taxable income: Taxpayers can reduce their taxable income by making contributions to a retirement account, such as an IRA or 401(k), or by making charitable contributions.
- Deferring the exercise of ISOs: Taxpayers who are considering exercising their ISOs can defer the exercise to a year when their regular tax liability is lower, reducing the impact of the AMT.
- Planning for state and local taxes: Taxpayers can reduce the impact of the AMT by planning for their state and local tax bill. For example, they can make estimated tax payments throughout the year or make a lump-sum payment in December.
Conclusion: The Alternative Minimum Tax (AMT) is a separate tax system that operates parallel to the regular tax system. The AMT affects a relatively small number of taxpayers, but it can have a significant impact on those who are subject to it. Taxpayers who are subject to the AMT can reduce its impact by reducing their taxable income, deferring the exercise of ISOs, and planning for their state and local tax bill. It’s important to understand the AMT and to consider its impact on your finances, as it can have a significant impact on your tax bill.
Understanding the Alternative Minimum Tax (AMT)
RUBRIC
QUALITY OF RESPONSE |
NO RESPONSE |
POOR / UNSATISFACTORY |
SATISFACTORY |
GOOD |
EXCELLENT |
Content (worth a maximum of 50% of the total points) |
Zero points: Student failed to submit the final paper. |
20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. |
30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. |
40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. |
50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. |
Use of Sources (worth a maximum of 20% of the total points). |
Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. |
5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. |
10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. |
15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. |
20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. |
Grammar (worth maximum of 20% of total points) |
Zero points: Student failed to submit the final paper. |
5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors |
10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors |
15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. |
20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. |
Structure of the Paper (worth 10% of total points) |
Zero points: Student failed to submit the final paper. |
3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. |
5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper |
7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. |
10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. |
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Understanding the Alternative Minimum Tax (AMT)
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