What Form 6251 (2013) is for
Form 6251 determines whether a taxpayer owes Alternative Minimum Tax by comparing regular income tax to a parallel tax system with different tax deductions and rules. The form recalculates alternative minimum taxable income by adjusting certain deductions, replacing the standard deduction, and adding tax preference items.
Higher-income taxpayers may trigger AMT liability when the tentative minimum tax becomes higher than their regular tax liability for the tax year. The form ensures that wealthy taxpayers and high-income households pay a minimum tax when tax benefits significantly reduce their taxable income.
When you’d use Form 6251 (2013)
Taxpayers file Form 6251 when certain deductions or tax preference items increase AMT income beyond regular taxable income. Individuals with incentive stock options, private activity bonds, intangible drilling costs, local taxes, or large itemized deductions often owe AMT.
Taxpayers who make taxable IRA distributions or claim the foreign tax credit may also need AMT review. Late or amended tax returns require updating AMT calculations if any federal income taxes, tax breaks, or adjustments change. This form applies to returns filed as married filing jointly, married filing separately, and single filing status.
Key rules or details for 2013
- Standard deduction replaced: The AMT disallows the standard deduction and recalculates taxable income using itemized deductions only. This often increases the taxable excess for both the AMT and the regular tax system.
- State and local taxes added back: State and local taxes must be added back because they receive favorable treatment under regular tax rules. This can significantly increase alternative minimum taxable income for high-income households.
- Incentive stock options are included: The spread between the fair market value and the exercise price for incentive stock options becomes AMT income. This increases the tentative minimum tax for higher-income taxpayers with stock-based tax preference items.
- Private activity bond interest taxable: Interest from private activity bonds or other tax-exempt bonds becomes taxable under AMT. These investments receive favorable tax treatment under regular federal income tax laws.
- Different depreciation rules: AMT depreciation differs from regular tax depreciation. Taxpayers must recalculate experimental costs, investment interest expense, or intangible drilling costs in accordance with AMT-specific requirements.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-step (High Level)
Step 1: Determine adjusted gross income
Start with adjusted gross income from your federal tax return and identify income items that increase alternative minimum taxable income. Include taxable IRA distributions, incentive stock options, and any tax-exempt interest from private activity bonds.
Step 2: Apply AMT adjustments
Add back state and local taxes, investment interest, and certain deductions that receive favorable treatment under regular income tax. Confirm whether tax deductions differ under AMT depreciation or regular tax rules.
Step 3: Add tax preference items
Calculate tax preference items such as intangible drilling costs, qualified small business stock exclusions, or experimental costs. These items increase AMT income and affect how taxpayers pay the minimum tax.
Step 4: Subtract the AMT exemption amount
Apply the exemption amount based on filing status. The exemption phases out at higher income levels, reducing the tax benefit and increasing both the AMT and total tax for some taxpayers.
Step 5: Calculate tentative minimum tax
Apply AMT tax rates to the remaining income. Compare the result with regular tax liability to determine whether you owe AMT or must pay additional federal income taxes for the tax year.
Step 6: Determine final AMT liability
Subtract regular tax liability from the tentative minimum tax. If the tentative minimum tax is higher, taxpayers owe AMT, and the difference becomes part of their total tax on the tax form.
Learn more about federal tax filing through our IRS Form Help Center.
Common mistakes and how to avoid them
- Incorrectly claiming the standard deduction: Many taxpayers mistakenly apply the standard deduction under AMT rules. You can avoid errors by confirming whether itemized deductions provide a more accurate alternative minimum taxable income calculation.
- Overlooking adjustments for incentive stock options: Some filers fail to account for AMT adjustments related to the spread in fair market value. You can prevent miscalculations by reviewing option exercise records and recalculating AMT income properly.
- Ignoring private activity bond interest: Tax-exempt interest may still be taxable under AMT rules. You can avoid issues by confirming whether your tax-exempt bonds qualify as private activity bonds.
- Using regular tax depreciation: Regular tax depreciation rules may differ from AMT depreciation. You can avoid errors by calculating experimental costs and asset depreciation in accordance with AMT-specific requirements.
- Missing documentation for deductions: Failing to provide proof for investment interest expense or certain deductions may result in filing issues. You can prevent delays by keeping complete records for the entire tax year.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What happens after you file
The IRS reviews Form 6251 to determine whether the taxpayer must pay AMT in addition to regular income tax. If the tentative minimum tax exceeds the regular tax liability, the difference becomes part of the total tax due. Taxpayers may qualify for an AMT credit in future years when regular tax exceeds the minimum tax, depending on income level and tax preference items. Proper tax preparation software or guidance from a tax professional helps ensure accurate AMT calculation and compliance with federal tax return requirements.
FAQs
How does IRS Form 6251 2013 determine whether I owe alternative minimum tax?
It compares the tentative minimum tax to the regular tax liability using AMT tax rates, adjustments, and preference items to determine whether taxpayers must pay additional minimum tax.
How does the alternative minimum tax affect capital gains for the tax year?
Capital gains receive preferential rates, but AMT rules still require adding certain deductions back, which may increase alternative minimum taxable income before applying those rates.
What is the difference between regular taxable income and alternative minimum taxable income?
AMTI includes state and local taxes, investment interest, and other adjustments that are not applicable under regular tax rules, thereby creating a distinct income base.
How does the alternative minimum tax AMT exemption affect different filing status categories?
The exemption amount depends on filing status and income level. It gradually phases out as income increases, which can raise the tentative minimum tax.
How does Form 6251 treat the foreign tax credit when calculating separate tax obligations?
The foreign tax credit is subject to different limitations under AMT rules. Taxpayers must compute separate tax restrictions before applying the credit.
Why does the alternative minimum tax require recalculating experimental costs?
AMT rules require recalculating certain deductions, including experimental costs, when they receive more favorable treatment under regular income tax rules.
How do alternative minimum tax individuals use exemption amounts and AMT calculation rules to determine liability?
Individuals calculate AMTI, apply the exemption amount, compute tentative minimum tax, and compare it to regular tax to determine AMT liability.
