One tax form that often confuses is IRS Form 6251. In this article, I will explain what Form 6251 is, what it is used for, and how to fill it out correctly.
What is IRS Form 6251?
IRS Form 6251, also known as the Alternative Minimum Tax (AMT) form, is a tax form used to calculate an individual’s alternative minimum tax liability. This form is required when certain deductions and credits are claimed, which may lower an individual’s regular tax liability to a level lower than the AMT liability.
The AMT is a parallel tax system designed to ensure that individuals with higher incomes pay a minimum amount of tax regardless of deductions and credits claimed. Form 6251 is used to determine if an individual is subject to the AMT and if so, calculate the AMT liability.
What is IRS Form 6251 used for?
IRS Form 6251 is used to determine an individual’s AMT liability. The AMT system was created to ensure that taxpayers who have a high income but are eligible for many deductions and credits do not avoid paying taxes altogether. The AMT is calculated separately from the regular tax system, and taxpayers must pay the higher of the two tax liabilities.
Form 6251 is used to calculate the AMT liability by adding back certain deductions and credits that are allowed under the regular tax system but disallowed under the AMT system. These include deductions for state and local income taxes, property taxes, and certain miscellaneous deductions.
What are the lines to fill in IRS Form 6251, and how to fill them out?
Filling out IRS Form 6251 may seem daunting, but it can be done easily with the right guidance. Here is a breakdown of the lines on the form and what information is required to fill them out:
Part I – Alternative Minimum Taxable Income and Adjustments
Line 1: Start with your taxable income from your regular tax return. This is the amount on Line 11b of Form 1040.
Line 2: Add back any adjustments you claimed on Form 1040, such as IRA contributions, student loan interest, and self-employment tax.
Line 3: Subtract the sum of Lines 1 and 2 from Line 7 of Form 1040.
Line 4: Add back any itemized deductions you claimed on Schedule A, such as state and local income taxes, property taxes, and certain miscellaneous deductions.
Line 5: Subtract the amount on Line 4 from the amount on Line 3.
Line 6: Multiply the amount on Line 5 by 26%. This is your tentative minimum tax.
Part II – Tentative Minimum Tax and Credits
Line 7: Enter any foreign tax credit from Form 1040, Line 48.
Line 8: Subtract Line 7 from Line 6.
Line 9: Enter any general business credit from Form 3800.
Line 10: Subtract Line 9 from Line 8.
Line 11: Enter any minimum tax credit from previous years.
Line 12: Add Lines 10 and 11.
Line 13: Enter any credit for the prior year’s minimum tax from Form 8801.
Line 14: Subtract Line 13 from Line 12.
Line 15: Enter any foreign tax credit from Form 1116.
Line 16: Subtract Line 15 from Line 14.
Line 17: Enter any residential energy credit from Form 5695.
Line 18: Subtract Line 17 from Line 16.
Line 19: Enter any other credits from Form 3800
Line 20: Subtract Line 19 from Line 18.
Line 21: Enter any unused credit carryforward from previous years.
Line 22: Add Lines 20 and 21.
Line 23: Subtract Line 22 from Line 16.
Line 24: Enter any alternative minimum tax foreign tax credit from Form 1116.
Line 25: Subtract Line 24 from Line 23.
Line 26: Enter any credit for small business employee health insurance premiums from Form 8941.
Line 27: Subtract Line 26 from Line 25.
Line 28: Enter any credit for certain other taxes from Form 3800.
Line 29: Subtract Line 28 from Line 27.
Line 30: Enter any credit for the prior year’s minimum tax from Form 8801.
Line 31: Subtract Line 30 from Line 29.
Line 32: Enter any credit for federal tax on fuels from Form 4136.
Line 33: Subtract Line 32 from Line 31.
Line 34: Enter any credit for electric vehicles from Form 8936.
Line 35: Subtract Line 34 from Line 33.
Line 36: Enter any credit for alternative fuel vehicle refueling property from Form 8911.
Line 37: Subtract Line 36 from Line 35.
Line 38: Enter any credit for railroad track maintenance from Form 8900.
Line 39: Subtract Line 38 from Line 37.
Line 40: Enter any credit for social security and Medicare taxes on certain unreported tip income from Form 4137.
Line 41: Subtract Line 40 from Line 39.
Line 42: Enter any credit for backup withholding from Form 2439.
Line 43: Subtract Line 42 from Line 41.
Line 44: Enter any other taxes from Form 3800.
Line 45: Subtract Line 44 from Line 43.
Line 46: Add Lines 23 and 45.
Line 47: Enter any alternative minimum tax foreign tax credit from Form 1116.
Line 48: Subtract Line 47 from Line 46.
Part III – Tax Computation
Line 49: Compare the amount on Line 48 to the amount on Line 11 of your regular tax return (Form 1040). If Line 48 is greater than or equal to Line 11, you do not owe AMT. If Line 48 is less than Line 11, you owe the difference as AMT.
Part IV – Alternative Minimum Taxable Income (AMTI)
Line 50: Enter the amount from Line 5.
Line 51: Enter any tax-exempt interest from Form 1040, Line 2a.
Line 52: Enter any interest on private activity bonds from Form 6251, Line 4.
Line 53: Add Lines 50, 51, and 52.
Part V – Other Taxes
Line 54: Enter any additional taxes you owe, such as the net investment income tax, the shared responsibility payment, or the excess advance premium tax credit repayment.
Line 55: Add Lines 49, 53, and 54.
Line 56: Enter the amount of your regular tax liability from Form 1040, Line 11a.
Line 57: Enter the number of your refundable credits from Form 1040, Line 18.
Line 58: Add Lines 56 and 57.
Line 59: If Line 58 is greater than or equal to Line 55, you do not owe any additional taxes. If Line 55 is greater than Line 58, subtract Line 58 from Line 55 to determine your additional tax liability.
Features of IRS form 6251
Here are the main features of Form 6251:
- Taxpayer Identification Information: This section requires the taxpayer’s name, address, and Social Security number. If filing jointly, this section must also include the name and Social Security number of the spouse.
- AMT Exemption: This section allows taxpayers to claim an exemption amount, which is used to reduce the amount of alternative minimum tax they owe. The exemption amount varies depending on the taxpayer’s filing status and income level.
- Taxable Income: Taxpayers must enter their taxable income from their regular tax return in this section. This includes income from wages, salaries, and tips, as well as interest and dividends.
- Adjustments and Preferences: This section requires taxpayers to add back certain deductions and exemptions that they claimed on their regular tax return. This includes deductions for state and local taxes, miscellaneous itemized deductions, and personal exemptions.
- Alternative Minimum Tax Calculation: This section calculates the taxpayer’s alternative minimum tax liability. The tax is calculated by applying a flat rate of 26% or 28% to the taxpayer’s alternative minimum taxable income.
- Credit for Prior Year Minimum Tax: This section allows taxpayers to claim a credit for any alternative minimum tax they paid in a previous year.
- Alternative Minimum Taxable Income: This section shows the taxpayer’s alternative minimum taxable income, which is used to calculate their alternative minimum tax liability. This amount is calculated by subtracting the AMT exemption from the taxpayer’s adjusted gross income.
- Other Taxes: This section includes any other taxes that the taxpayer owes, such as the self-employment tax or the additional Medicare tax.
- Payments and Credits: This section shows any tax payments the taxpayer has made throughout the year, as well as any credits they are eligible to claim.
- Alternative Minimum Tax Due: This section shows the taxpayer’s total alternative minimum tax liability for the year. If the alternative minimum tax is higher than the taxpayer’s regular tax liability, they will owe the difference.
In conclusion, IRS Form 6251 is a complex tax form used to calculate the alternative minimum tax liability. It is important for taxpayers to carefully review the instructions and seek professional advice if needed to ensure they are accurately calculating their alternative minimum tax liability.
Read more about What Is IRS Form 1310 Used For
