For a head of household taxpayer in California, what is the maximum AMT exemption amount if their AMT income is $179,000?

The correct maximum AMT exemption amount for a head of household taxpayer in California with an AMT income of $179,000 is $78,070. This exemption is designed to reduce the amount of Alternative Minimum Tax (AMT) that a taxpayer may owe.

The AMT exemption phases out at higher income levels, which means that for taxpayers with AMT incomes exceeding certain thresholds, the amount of the exemption gradually decreases. In the case of a head of household, the initial exemption amount is set at $78,070, assuming the taxpayer’s AMT income is within the acceptable limits before any phase-out occurs. Given that the specified AMT income of $179,000 does not exceed the threshold for the exemption to be fully claimed, the taxpayer can utilize the full exemption amount.

Understanding AMT exemptions is crucial for tax planning, as they can significantly impact the tax liability for high-income individuals by allowing higher deductions from their taxable income. This particular exemption amount should be kept in mind when preparing tax returns, especially for self-employed professionals or those with substantial income in California.