A taxpayer is subject to the Alternative Minimum Tax (AMT) in Year 1. They paid $10,000 in state income taxes and $15,000 in charitable contributions. Which of these deductions are allowed for AMT purposes?

Answer options:

Both State Taxes and Charitable Contributions

State Taxes only

Charitable Contributions only

Neither

How to approach this question

Identify AMT adjustments. SALT is a positive adjustment (disallowed). Charity is allowed (no adjustment).

Full Answer

C.Charitable Contributions only✓ Correct

IRC §56(b). No deduction is allowed for state, local, or foreign real or personal property taxes or income taxes for AMT purposes. Charitable contributions remain deductible.

Common mistakes

Thinking SALT is allowed; thinking Charity is disallowed.

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