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AMT - Alternative Minimum Tax - CPA Exam | CPA Review | Another71 - YouTube
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hello everyone today I want to go over
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just some pretty basic KMT topics just
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for purposes of helping you pass the CPA
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exam now I realize that there are some
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tax professionals who might watch this
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and freak out over the simplistic nature
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of this of this explanation of AMT but
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really you don't need to be an AMT
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expert to pass the regulation section of
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the CPA exam you just need to be able to
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answer a few questions about AMT and
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move on and I don't think that you're
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going to need to answer some complex
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calculations and stuff like that you
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just need to know the basics about AMT
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and in particular what items get added
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back to your taxable income for AMT
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purposes and that's pretty much it so
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basically AMT you start with your
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taxable income your regular taxable
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income and then you have to add back
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some adjustments that that you that that
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were already removed from your from your
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adjusted gross income like on Schedule A
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normally for Schedule A you can you can
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deduct your medical expenses in excess
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of seven and a half percent of your AGI
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now they put 7 half percent because most
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people don't have that many don't have
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that much medical expense and so they
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don't use it at least I don't and but
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for purposes of AMT whatever you
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deducted in addition to seven and a half
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percent now now you now the threshold
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moves to ten percent so so you have to
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you have to add back any of that medical
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expense that falls under the ten percent
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so just remember that that a medical
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a medical adjustment is 10% of AGI not
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seven-and-a-half percent now if you
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deducted mortgage interest on your
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schedule a that wasn't used for buying a
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home improving it or whatever then you
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have to add that back to so if you took
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out a loan on your house to pay off a
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credit card doesn't count for AMT it has
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to be added back if you if you deducted
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any personal tax like real estate tax
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property tax state local tax for
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Schedule A that gets added back also and
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then all the all the deductions that are
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that have the two percent threshold they
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have to be greater than two percent
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cumulatively in order to be in order to
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count for your schedule a that gets
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added back to so for purposes of the CPA
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exam just remember that the adjustments
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they get added back are ten percent of
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medical mortgage interest that wasn't
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used to improve or build a house your
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real estate taxes your property taxes
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your state and local tax state local
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income tax whatever and then Ana
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miscellaneous deductions so that's what
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you need to know now your preference
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items there's a few preference items but
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for purposes of the CPA exam I would
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make sure that I just know that I would
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know that for that for real estate
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purchased after 1987 if you took
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accelerated depreciation on that
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whatever the difference is between the
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accelerated depreciation that you took
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and straight-line you have to add that
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back to so you have these adjustments
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and these preference items and two more
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preference two more adjustments are
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you cannot take a standard deduction for
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AMT and you and no personal exemptions
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are allowed and so yeah your taxable
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income you have your adjustments that
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you're adding back and that that brings
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you to your AMT your alternative minimum
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taxable income and then from that you
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subtract an exemption and for purposes
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of the exam don't memorize the
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exemptions you can if you want I didn't
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and I and I scored a 92 on regulation
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and I did not memorize that so take that
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with a grain of salt I guess which
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brings you to your alternative minimum
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tax base and then to that you so that's
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kind of like your your taxable income so
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to speak and so to that you you apply if
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you have if this number is less than
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175,000 and I'm using the the 2011
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numbers from the Wiley book and if you
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if you apply a 26% rate for less than
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175,000 again don't memorize that number
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it gives you a number and then you
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subtract a foreign credit for AMT which
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brings you to your tentative minimum tax
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now for purposes of the exam you need to
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know how we arrived here don't mess with
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the exemption stuff but basically you
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need to know how we how we get to this
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tentative minimum tax number and then
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once we have the tentative minimum tax
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number then then we take what our
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regular tax liability was and then the
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difference is your Alma's your
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alternative minimum tax your AMT and
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whatever you pay can be carried forward
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indefinitely but it can only applied to
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future regular tax liability it cannot
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offset future AMT
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so let's do a few multiple-choice
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questions so this is from the the wily
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CPA online test Bank and these questions
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are below this post if you're on another
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71 calm or if you're watching this on
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youtube click the link and write it
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right below the video and it'll take you
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to the questions all right number one
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the alternative minimum tax is computed
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as the excess of regular tax over
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tentative AMT the excess of tentative
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AMT over the regular tax tentative AMT
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over the regular tax that's what it is
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the answers be the credit for prior to
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your alternative minimum tax liability
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may be carried forward indefinitely
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twenty years back to carry 420 or back
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three carry four five and we just talked
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about and be carried forward
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indefinitely and again it can only
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offset future regular tax liability
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cannot offset feature AMT in 2009 Joe a
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single taxpayer had $80,000 in taxable
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income before exemptions you had no tax
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preference items in his itemized
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deductions whereas followed real
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property taxes of $4,000
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so $4,000
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home mortgage interest on on a loan to
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purchase residence which is okay and
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miscellaneous deductions in excess of
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two percent of AGI of $2000
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so he made $80,000 and what amount did
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he report as his am has his alternative
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minimum taxable income and so eighty
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plus six eighty six thousand dollars and
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the answers be eighty six thousand
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dollars all right when determining his
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federal income tax Kurt had the
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following items for two thousand nine
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personal exemption of 3650 so 3650
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itemized deduction for personal property
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taxes of 2,500 property taxes I think
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there 2500 all right
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that's 60 word charitable contribution
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of capital gain property that's okay
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net long-term capital gain that's okay
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and excess of accelerated depreciation
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of a straight line on real property
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placing service after 87 of $600
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tax-exempt interest from the city of
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Chicago general obligation bonds that
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also is okay and so we add up a
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preference items of $600 and we add up
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our adjustments of 6150 and that's the
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answers be last question which of the
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following itemized deductions are
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deductible when computing AMT state
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income taxes is that deductible no home
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equity mortgage interest when the loan
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proceeds were used to purchase an auto
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no only if it's used to purchase a home
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or improve the home medical expenses
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amounting to 10 percent well it says
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that it amounted at 10 percent has to be
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in excess of 10 percent to count home
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equity mortgage interest from the loan
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proceeds were used to add an additional
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room to the house and that is true
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the answer is D
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