Prior Year Minimum Tax Credit (Form 8801)

This credit is a nonrefundable credit if you paid the Alternative Minimum Tax (AMT) in a previous tax year. The Alternative Minimum Tax credit is used to recover excess tax paid due to the AMT in prior years, but it can only be applied to reduce your regular income tax liability in subsequent years when you are not subject to the AMT.

In other words, you can only claim the AMT credit in tax years when you are not subject to the Alternative Minimum Tax. If you have an AMT credit in a given year, you can carry it forward to future tax years to offset your regular income tax liability. However, the AMT credit cannot be used to directly reduce your future AMT liability.

Use Form 8801:

• If you had an AMT liability for deferral items such as depreciation or incentive stocks that were not sold
• To calculate the minimum tax credit
• To calculate the amount you can carry over to future years

Even if the taxpayer cannot claim the credit, filing Form 8801 allows them to carry the credit forward. 

This entry was posted on Friday, November 20th, 2020 at 5:26 pm and is filed under Credits. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.