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Last Updated: 12/29/2016

Alternative Minimum Tax

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The Alternative Minimum Tax (AMT) is meant to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. Schedule M1MT, Alternative Minimum Tax, determines what this minimum should be and compares it to the normal tax calculation. You must pay whichever amount is higher.

If you have to calculate AMT on your federal return then you must complete Schedule M1MT when filing your Minnesota return (Form M1, Individual Income Tax). State and federal rules differ, so you may have to use the schedule and pay Minnesota’s AMT even if you didn’t on your federal return. Some common reasons for this include:

  • Large gambling losses claimed as deductions on federal Schedule A (1040). Minnesota doesn’t allow deductions for gambling losses when calculating and paying the AMT. The IRS allows filers to take gambling losses as an itemized deduction, up to the amount of the gambling winnings.
  • Large home mortgage interest deductions on Schedule A. Allowed for federal AMT purposes but not for Minnesota.
  • Large amount of state or local taxes (such as income, sales or property) on line 9 of Schedule A: Not allowed for either federal or Minnesota AMT.
  • Individuals employed in occupations where they claim large amounts of employee business expenses: Not allowed for either federal or Minnesota AMT (except impairment-related work expenses of a disabled person).
  • Families with large numbers of exemptions. Not allowed for either federal or Minnesota AMT.
  • Taking the standard deduction in combination with large exemptions or income subtractions that are later disallowed on your state return.

Who has to file Schedule M1MT?

If you used federal Form 6251, Alternative Minimum Tax: Complete Schedule M1MT on your Minnesota tax return to determine if you must pay additional tax.

If you did not use federal Form 6251: Follow the steps below to determine if you have to file Schedule M1MT:

1.  Determine the total amount of all the following items:

  • Dollar amount of personal exemptions
  • Accelerated depreciation
  • Exercise of incentive stock options
  • Tax-exempt interest or dividends from Minnesota private activity bonds that weren’t subtracted on Schedule M1M (usually bonds issued by state or local governments where the proceeds are used by private enterprises)
  • K-12 education expenses from line 17 of Schedule M1M
  • Amortization of pollution-control facility
  • Intangible drilling costs
  • Depletion
  • Reserves for losses on bad debts of financial institutions
  • Circulation and research and experimental expenditures
  • Mining exploration and development costs
  • Installment sales of property
  • Tax sheltered farm loss
  • Passive activity loss
  • Income from long-term contracts for the manufacture, installation or construction of property to be completed after the current tax year
  • Gains excluded under IRC section 1202
  • Preferences and adjustments from an electing large partnership (from the AMT adjustment boxes from Schedule K-1 of federal Form 1065-B)

2.  Add the result from step 1 and the amount on line 40 (itemized deductions) of your federal Form 1040

3.  From the result in step 2, subtract the amounts on lines 4 (medical and dental expenses), 14 (investment interest), and 20 (casualty or theft loss) of your federal Schedule A

4.  You must complete Schedule M1MT if the result in step 3 exceeds the following amounts (for tax year 2015):

  • $73,690 if married and filing jointly or qualifying widow(er)
  • $36,840 if married and filing separately
  • $55,270 if single or head of household

To complete the schedule, you’ll have to complete Part I of federal Form 6251, even if you didn’t use the form on your federal tax return.

5.  You must pay the Minnesota AMT if the “alternative tax” on line 27 of Schedule M1MT exceeds the “regular tax” on line 28.

What is the Alternative Minimum Tax rate?

Beginning with tax year 2013, the rate is 6.75%.  For tax years 2012 and earlier, the rate was 6.4%.
 

View the statute, M.S. 290.091

Alternative Minimum Tax Credit

Taxpayers who were required to pay AMT in a prior year, but not in the current year, may qualify for the Minnesota AMT credit. For details, see Alternative Minimum Tax Credit and Schedule M1MTC, Alternative Minimum Tax Credit.