AMT, how to prevent it?

As I understand it, AMT is a function of income and deductions; too many deductions for the level of income and some of them don't count. Is all income created equal? If I am in trouble this year, should I take some profits on stocks, or do capital gains not count? I suppose the other thing to do is to try to defer deductions until next year. Any other suggestions? (next year doesn't look to be a problem.)

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Reply to
Ted
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You're close, but it's not all deductions. The best list I've seen appears at

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though that list shows as a 'top ten', my experience isthat the two largest triggers are Property Tax and StateIncome Tax. Interest on first mortgages aren't a factor, norare charitable donations. For those who are impacted as aone-time event (i.e. most seem to earn their way into AMTland as their income passes a threshold so the higher StateTax deduction drags them along) I observe that a long termstock cap gain is the culprit. There's a chance of recoupingsome of the AMT as a credit into the next year depending onyour situation. The 2006 tax software programs are out. This is a good time to get a copy and find out what your options are. You may consider: Selling stock that has a loss (you can buy it back

31 days later if you wanted that stock in your portfolio for the long haul) Paying the January mortgage now and getting the extra month's interest deduction. Donating stock you've held long term to charity, you avoid the cap gain tax and get the full market value as a deduction. If your property tax bill is due 12/1, payable by 1/2/07, you may consider making the payment in 07. There are other triggers, of course, as the link above describes, and other possible ways to avoid for each trigger. But time is running short. JOE JoeTaxpayer.com
Reply to
joetaxpayer

"Ted" wrote

AMT is a combination of the types of income and your deductions and exemptions. Too many of one, the other, or both and AMT kicks in. Oh, capital gains are an AMT adjustment item, as they do not receive a favorable tax rate under AMT.

If you can defer deductions, then do so. Otherwise defer income, or types of income, if that's a possibility. There's less than 14 days left.

-- Paul A. Thomas, CPA Athens, Georgia

Reply to
Paul Thomas

The AMT is quite complex & traps taxpayers from many different angles. There are issues in high tax states (income & property taxes). -many effectively lose some or all of the benefit of these deductions. There are issues with adjustments to income for AMT. ... and this is just barely scratching the surface

Another side effect of AMT is that dividends & capitals gains aren't taxed at 15%. ___________________________________

-----> real address on hobokeni or hobokenx

Reply to
Benjamin Yazersky CPA

That's incorrect. Qualified dividends and long-term capital gains are taxed at the same 5%/15% rate under the AMT as under the regular tax and are NOT an adjustment/preference item under the AMT.

-- Rich Carreiro snipped-for-privacy@animato.arlington.ma.us

Reply to
Rich Carreiro

That depends on where you are in the AMT.

If your AMT income is such that you are in the zone where the AMT exemption phases out, then the nominal 15% rate on qualified dividends and LTCG turns into an actual marginal rate of 21.5% to 22%. This is an effect of the phaseout, not a difference in the tax figured on qual divs and LTCG.

Once your AMT exemption is totally phased out, the actual marginal rate on qual divs and LTCG drops back to 15%.

-- Rich Carreiro snipped-for-privacy@animato.arlington.ma.us

Reply to
Rich Carreiro

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