Message Font: Serif | Sans-Serif
No. of Recommendations: 0
I posted this a week ago and got one answer that I didn't understand.
Anyone else have insight?

I'm the guy that gave you the uinsatisfactory answer last week, and am probably the only one that will answer you, so you'll have to bear with me or define your questions and post it on another board. Deja have some pretty sharp cookies.

You said:Well, I just noticed (after typing all this!!) that on line 27 of form 6251 they use line 40 of
form 1040, which is that Tax amount before applying credits. Is it possible that before
Congress extended this exemption for applying AMT to the credits, that instead of line 40
they used line 49, which is tax due after the credits? Because if so, I can see how that would
completely nullify the credits in lines 41-47, causing line 28 of form 6251 to add the
amounts of the credits to the AMT due (which gets transferred back to line 51 of form

No. First let me say that the stating that the Child Tax Credit is not limited by the AMT is confusing, but the law WAS extended, and the Credit never was limited by the AMT. Line 49 was not used. They did it a different way. They put these new credits with some other personal credits that were not affected by the AMT payment.

Note that all these line 40s (41-48) credits can reduce your regular tax to $0, but the AMT is then added on, and then some credits can be subtracted from that on lines 59 and 60, including the Additional Child Tax Credit. But CERTAIN of the line 40s credits come from Form 3800 and 8801. We're concerned with the Form 3800. I can't recall how this works exactly, but if you follow Form 3800 through you will find that all the other credits EXCEPT the line 41-46 credits(personal credits not subject to AMT limitations) ARE NOT usable if you actually pay an AMT. In other words, you can't reduce your regular tax below the Tenative Minimum Tax using General Business Credits (form 3800 credits), 8801, 8396, Electric Vehicle, Low Income Housing, Alternative Fuel Source, etc, and form 3800 is the method to put in correct order which of these you use first. You use 3800 if you have more than one General Busines Credit, but each of the others will do the same thing if you have only one credit.

My background on this is that for several years I personally had Low Income Housing and Alternative Fuel Source and Foreign Tax credits in excess of what was usable and had to work these out on form 3800. I then designed a 1040 calculator for quarterly installments which (amoungst other problems) must put these credits in the correct order as determined by Form 3800, and let me assure you if you plug in various credits on our calculator you can see the others disappear as they are phased out in a very definitive order (which I offhand can't remember).

That should answer your#1, I hope.

However; there's another factor. IF you have 3 or more children the Additional Child Tax Credit form 8812 and Pub 972 effectively allow you to get paid the full Child Tax Credit up to the amount of your Social Security Tax, whether you owe AMT or not. It's more complicated than that simple statement, but generally speaking that's what happens.

As for #2, yes that's because your tax bracket of 28% is about the same as the 26% or 28% AMT tax bracket. You won't get more credit until you get into the 31, 36, or 39.6% brackets, and then it's not much.

As for #3 yes, you may very well have wasted certain deductions that are not allowable AMT deductions (see top of Form 6251 for which are added back in.)

As for #4, its too late for 1999.

As for #5 you can use our year 2000 tax calculator on, which is free unless you want to use the quarterly installment calculator feature. It is the ideal "what-if" for your situation because it is in changable, viwable spreadsheet format, AND we put 2000 rates in in December of 1999 and compute as though nothing is going to chage. If it changes, sorry, we tried to be of service and will correct our program as soon as we find out.

After you have worked through the 6251 and 3800 with actual different classes of credits (let alone the Child Tax Credit worksheet, you'll understand why no one else tried to answer your questions. Hope I could help. Ed

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.