For a given tax year, if a taxpayer is not required to pay alternative minimum tax (AMT) but did pay AMT in a previous year, they may be able to claim a minimum tax credit against their current year taxes. This credit may be both refundable and nonrefundable, that is, if the taxpayer qualifies, the credit can not only reduce their tax liability but also increase their refund. A taxpayer cannot claim this credit if they are required to pay AMT in the same year.
AMT is caused by two types of adjustments and preferences—deferral items and exclusion items.
- Deferral items generally don't cause a permanent difference in taxable income over time. One example is depreciation.
- Exclusion items cause a permanent difference in taxable income. Examples:
- Itemized deductions (including investment interest expense reported on Schedule E)
- Certain tax-exempt interest
- Section 1202 exclusion
- Adjustments related to exclusion items
The minimum tax credit is only allowed for AMT caused by deferral items.
The credit is figured on Form 8801. Even if the taxpayer cannot claim the credit, filing Form 8801 allows them to carry the credit forward. Completing this form will also entail completing one or more worksheets available in the instructions.
To access the Prior Year Minimum Tax Credit, from the Main Menu of the tax return (Form 1040) select
- Credits Menu
- Prior Year Minimum Tax Credit (8801)
Note: This is a guide to entering the credit for prior year minimum tax into the TaxSlayer Pro program. This is not intended as tax advice.