 Alternative Minimum Tax Planning
More and more taxpayers are affected by AMT. If AMT is not changed, it is estimated by the Tax Policy Center, that 70% of taxpayer’s with income between $100,000 and $200,000 will be subject to AMT. If your tax is higher under AMT (Alternative Minimum Tax) then your tax under the regular method, then AMT tax applies. You may be subject to the AMT without even knowing it. Many deductions allowed under the regular tax aren’t allowed under the AMT tax. You may be subject to the AMT if the following exists:
 Large number of dependents – exemptions are not allowed for AMT purposes
Large state and local tax deductions – not allowed for AMT purposes
Interest on second mortgages – interest not used to buy or build a house not allowed
Large miscellaneous itemized deductions – not allowed for AMT purposes
Large tax credits – many of the credits allowed under the regular tax system are not allowed for AMT tax
Long-term capital gains could eliminate the exemption account
Tax-exempt interest – some bonds (Private Activity Bonds) aren’t exempt for AMT purposes.
Obviously, by proper planning you may diminish the effect of AMT. Defer paying AMT non-deductible expenses to a year when you are not subject to AMT.
|
