For 2016, George has regular tax liability of $8,000 and tentative minimum tax (

Question

For 2016, George has regular tax liability of $8,000 and tentative minimum tax (AMT) of $9,000. He also has the following credits:

Child care credit $1,000. American Opportunity education credit $1,000 which of the following statements is tru for 2016? A Personal credits are not allowed to reduct TMT . B personal credits can areduce AMT to the extent they exceed TMT. C Personal credits can reduce AMTI to the extent they do not exceed the threshold. D. personal credits can reduce TMT and regular tax.

Explanation / Answer

A person needs to calculate tax in 2 different ways. First, he calculated his tax by Tax laws and Secondly, he calculates Tax as per AMT rules, ie he needs to pay a minimum amount of tax when his AMT exceeds the Regulat tax. Regular tax allows the deduction of certain expenses but AMT rules only allows business expenditures. Hence claims such as Childcare credit and educational credit are not allowed to be claimed under AMT.

Hence option A is correct

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