Is there an easy way to understand the ramifications of AMT for ISOs?
After the stock bubble burst, I was left with an AMT tax which was far greater than my entire income due to my exercise of an ISO stock option. I had to empty my bank account and remortgage my house just to pay taxes on money that I never made (and never will make) due to my lapse of understanding of the horrors of the AMT for ordinary people. Trust me, if a five-foot-two inch petite lady ever goes postal in Congress, you can look me up!
My problem is I still don't understand how to get OUT of the AMT calculation horror. I still own the (nearly worthless now) shares of that ISO that kicked me into the horrors of the AMT. Yet, every year since, I've had to fill out a miriad of alternate tax forms.
Basically, because of the horrors of Congress' Alternative Minimum Tax system, I have to repeat the horrors of the regular tax system, twice, and with wholly different rules. For example, I have to fill out form 8582 passive activity loss limits twice, once with regular calculations, the other with AMT calculations. Same with the CA3801. Twice. Same with 8801 AMT prior year calculations. Twice. And the list goes on.
Everything seems to turn topsy turvy with the Alternative Minimum Tax system - for example, a 29.5 year depreciation turns into a 40-year depreciation.
The question I'm leading up to, in exhausted exasperation, is whether or not there is a way to UNDERSTAND the AMT such that I can figure out how to (finally) get out of it given that the single item that kicked me into the huge AMT (more than my income) tax was a naive exercise of an ISO stock option. That stock is now nearly worthless so I've paid far more in AMT taxes than the stock is currently worth.
I ask in almost complete exasperation ...
Is there an easy way to describe how I can get out of this AMT tax calculation hell?