Understanding AMT and Investment Surtax

Managing your income to minimize taxes can be challenging due in part to complex tax provisions. The alternative minimum tax (AMT) and the 3.8% surtax on net investment income both involve complex calculations, making it difficult for most people to determine whether they will be subject to the AMT or investment surtax each tax year.

• The Alternative Minimum Tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two. For 2024, the AMT exemption amount is $85,700 for singles and $133,300 for married couples filing jointly.*
• The surtax on net investment income (NIIT), which was created as part of the Affordable Care Act, currently remains in effect. It subjects investment income to a premium tax rate if your adjusted gross income (AGI) exceeds a stated threshold.

One of the best ways to avoid or minimize taxes is to communicate throughout the year with your tax and financial professionals to obtain advice before making decisions that may result in a taxable event. 

Contact the office today to discuss strategies that may help you hold onto more of your income. 

^{* https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024}

^{This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.}