What item is eligible for a prior year Alternative Minimum Tax Credit?

The Alternative Minimum Tax (AMT) system is designed to ensure that individuals and corporations pay at least a minimum amount of tax, regardless of deductions, credits, and other tax breaks. One of the credits that can be carried forward to a prior year under AMT is associated with depreciation.

When taxpayers calculate their AMT, the depreciation methods used can affect the calculation. For example, taxpayers who used straight-line depreciation for AMT purposes may have differences in their depreciation calculations, leading to potential AMT liability in prior years. If they overpaid taxes as a result, they can claim an AMT credit for prior years' AMT that was due to the excess depreciation adjustments. This credit can offset regular tax liability in future years, making depreciation eligible for the prior year AMT credit.

In contrast, the other items mentioned, such as property tax, state income tax, and mortgage interest, do not generally qualify for the AMT credit in the same way, as the AMT disallows many of these deductions when calculating taxable income. Therefore, depreciation is the only item among the options that fits the criteria for prior year AMT credit eligibility.