AMT and Depreciation

[hananb21]

Client's AGI is the same as 2018 ($73k), filing status changed from HOH to Single but the  AMT adjustment  reduced Depreciation almost 500% what it was in 2018. What would cause this to happen?  

[BobKamman]

Once you start reducing something by more than 100%, there's no telling where the problem began.

[TaxGuyBill]

Is the correct "prior depreciation" entered?

Did the business percentage change?

Did you change anything on the Asset Entry Worksheet?

What type of property is this?

Because looking funky on the worksheet, does this actually affect the tax return?  In other words, is the taxpayer actually subject to AMT?

[hananb21]

This is the 4th year of a 5 year life. previous 3 years went perfectly  with proper accumulated depreciation. Proseries adjusted current year Depreciation $459 for AMT in 2018. This year it made a reduction of $1,767 for AMT. Doesn't make sense. Since nothing changed from last 2018.

[hananb21]

Thats my dilemma, is he actually subject to AMT? Single individual with Income of $75k taking standard deduction. Asset is a heavy duty dump truck. 

[TaxGuyBill]

---

@hananb21 wrote:

This is the 4th year of a 5 year life. previous 3 years went perfectly  with proper accumulated depreciation. Proseries adjusted current year Depreciation $459 for AMT in 2018. This year it made a reduction of $1,767 for AMT. Doesn't make sense. Since nothing changed from last 2018.

---

That sounds right.  🙂

AMT depreciation uses 150%DB.  Your regular depreciation uses 200%DB.  Those adjusted amounts are the difference for each year.  Because of the different schedule of depreciation, the adjustment will be different each year.

So let's say you have a Dump Truck with a Basis of $34,000.  These are the depreciation amounts for each year:

	200%DB (Regular Depreciation)	150%DB (AMT Depreciation)	Difference (AMT Adjustment)
Year 1	$6800	$5100	-$1700
Year 2	$10,880	$8670	-$2210
Year 3	$6528	$6069	+$459
Year 4	$3917	$5664	+$1757
Year 5	$3917	$5664	+$1757
Year 6	$1958	$2832	+$874

[TaxGuyBill · Accepted solution]

Does that help?

And if the taxpayer isn't subject to AMT, it doesn't matter.  So if there isn't anything on Line 1 of Schedule 2, the taxpayer is not subject to AMT and those adjustments don't do anything.

[hananb21]

Pretty good analysis. I appreciate the time you put into it. Thanks much!