pools and hot tubs does not count. A credit for 30 percent of the amount paid for qual-
ified fuel cell property up to a maximum credit of $500 for each 0.5 kilowatt of capacity
is also allowed, with no cap on the total credit which may be claimed. The credits in
these categories may be claimed on both a principal and a second residence.
In 2007, Mary buys $8,000 of solar energy equipment to heat her home.
She may claim a credit of $2,000 (30% of $8,000 is $2,400 limited to a
maximum of $2,000).
In 2008, Mary buys $4,000 of solar water-heating equipment for her
second (vacation) home. She may claim a credit of $1,200 (30% of
$4,000) for 2008.
THE INDIVIDUAL ALTERNATIVE MINIMUM TAX (AMT)
A last minute change to the AMT exemption amounts was passed by Congress and
signed into law December 26, 2007 after this text went to press. Please see the changes
highlighted in the following pages. Many individual taxpayers are subject to two parallel
tax calculations, the regular tax and the alternative minimum tax (AMT). The AMT was
designed in the 1960’s to ensure that wealthy taxpayers could not take advantage of spe-
cial tax write-offs (tax preferences and other adjustments) to avoid paying tax. In gen-
eral, taxpayers must pay the alternative minimum tax if their AMT tax liability is larger
than their regular tax liability.
The AMT is calculated on Form 6251, using the following formula simplified for
purposes of this text:
Regular Taxable Income (before exemptions and standard deduction)
+ Plus or minus AMT tax preferences and adjustments
Equals Alternative Minimum Taxable Income (AMTI)
Less AMT exemption (phased out to zero as AMTI increases)
Equals amount subject to AMT
Multiplied by the AMT tax rate (s)
Equals Tentative Minimum Tax
Less Regular Tax
= Equals amount of AMT due with tax return if a positive amount
Revised for AMT ‘‘patch’’ included in the ‘‘Tax Increase Prevention Act of 2007,’’ signed into law December 26,
Self-Study Problem 6.7
Calculate the energy credit allowed for th