Understanding Schedule D for AMT (Alternative Minimum Tax)

But if you only have long term capital gains, isn't the tax rate the same under both regular tax and AMT? Why would the software even bother with these calculations?

You're right that for most taxpayers with only long-term capital gains, the tax rate would be the same under both systems. However, the software still needs to run the AMT calculation regardless because there could be other factors that trigger AMT. Even with just Schedule D, there are differences in how certain transactions might be treated - like incentive stock options or certain types of investment expenses. The software performs the complete calculation for everyone to ensure accuracy, even if ultimately AMT doesn't apply to your situation.

Does it actually work with complicated stuff like AMT? I tried using the IRS instructions and got completely lost in the technical jargon.

I'm skeptical - how exactly does it trace the AMT calculations when the tax software itself doesn't show all the steps? Does it just give general explanations or actually trace your specific numbers?

It absolutely works with complicated calculations like AMT. The system is designed specifically to handle technical tax concepts and break them down into understandable explanations. It saved me hours of frustration when dealing with similar issues. For your question about tracing specific calculations, it actually does both. It can analyze your specific numbers and documents to show exactly how your personal calculations were derived, but it also provides the general explanations of the tax concepts so you understand why those calculations were necessary in the first place.

Wait, so what exactly is this service? Does it just put you in the front of the IRS phone queue somehow? How is that even possible?

This sounds like BS honestly. IRS wait times are infamous - how could some third-party service possibly get you through faster than calling yourself? Seems sketchy to me.

It's not about putting you at the front of the queue, but rather doing the waiting for you. The service uses an automated system that navigates the IRS phone tree and waits on hold in your place. Once they reach a human representative, you get a callback so you can speak directly with the agent. Regarding your skepticism, I totally understand - I felt the same way at first. But the technology just automates the waiting process that you'd otherwise have to do yourself. It's basically like having someone else sit on hold for hours instead of you doing it. Nothing shady about it - you still talk directly with the official IRS agents, just without the hold time frustration.

Thanks for explaining this! I don't have ISOs but I did sell some rental property this year with depreciation. Could that be why I'm seeing these weird calculations? The software is showing different basis amounts in the AMT section than what I actually paid for the property.

Yes, that's exactly why you're seeing those calculations! When you have depreciation involved, AMT calculations become necessary because AMT and regular tax treat depreciation differently. For the rental property, the AMT basis is likely different because AMT requires different depreciation schedules than regular tax. Over the years, this creates a difference between your regular tax basis and AMT basis in the property. When you sell the property, these different bases result in different gain calculations. The software is calculating both to determine if you might owe AMT on the difference.

This isn't always good advice. I trusted my software blindly last year and ended up with an IRS notice because there was a transaction it didn't handle correctly for AMT purposes. Always better to understand what's happening with your taxes.

This is really helpful! I'm dealing with a similar situation where my tax software is showing AMT calculations that I can't trace back to my inputs. The rental property depreciation explanation makes a lot of sense - I never realized that AMT and regular tax could have different basis amounts for the same property over time. One question though - when you say "print out the AMT worksheet," where exactly do I find this in most tax software? Is it usually buried in some advanced section, or should it be easily accessible? I'm using TurboTax and haven't been able to locate detailed AMT worksheets that show the step-by-step calculations. Also, do you know if there's a threshold where these AMT calculations become more likely to actually result in owing AMT, or is it pretty much automatic for anyone with rental property depreciation recapture?

Great question about finding the AMT worksheet! In TurboTax, you usually need to go to "Forms" view (there's typically a tab or button for this) and look for Form 6251. The detailed AMT calculations aren't always shown in the interview screens, but they're generated in the actual forms. You might also find it under "Tax Tools" or "View Forms" depending on your TurboTax version. Regarding thresholds - AMT becomes more likely when you have higher income combined with certain "preference items" like depreciation recapture. For 2024, the AMT exemption is $85,700 for single filers and $133,300 for married filing jointly. But it's not automatic just because you have rental depreciation - it depends on your total income and other factors. The software runs both calculations and you only pay AMT if it's higher than your regular tax. The key thing is that even if you don't end up owing AMT, the software still has to do all these calculations to prove you don't owe it. That's why you're seeing all these numbers that seem to come from nowhere!