- quote -

And just to add to that, if you pay AMT, you may be able to get some of it
back in the form of AMT credits in future years.
--
Robert J. Romano, CPA
99 Massachusetts Avenue-Suite 4
Arlington, Massachusetts 02474-8600
www.romanocpa.com

Joseph Weinstein <joe[at]bea.com> wrote in message news:<6.0.1.1.2.20040921160506.067c8d38[at]ussfex01.bea.com> ...
- quote -

Humor me, I'm not a tax expert either. Most of you probably have
forgotten more than I know now...

Can I imply that if I have a moderate income, with high property tax I
could get subject to AMT? I pay attention to how much taxes I pay
about once a year, so I'm sure it could be more complciated than my
statement...

I ask only because I want to avoid AMT and am trying to figure out
precautions to avoid it.

noreplysoccer[at]hotmail.com (Jim) writes:

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(1) "Avoiding AMT" is not a particularly valid objective.
A better objective is "lowering the total tax you
pay" (and before EdZ weighs in , an even better objective
is "maximize your after-tax income"). Some things that
"avoid AMT" actually end up resulting in you paying more
taxes than if you had just taken the AMT hit.

The important thing to remember is that the "AMT" line
on Form 1040 isn't an independent tax. Instead, it
is the difference between the regular tax (RT) and
tentative minimum tax (TMT). In other words, you compute
your tax under the RT system, then you compute your tax
under the TMT system, and pay whichever is higher. The
"AMT" entry on form 1040 is simply a bookkeeping entry
to make the total tax shown on 1040 be equal to the TMT.

Since AMT = TMT - RT, you can see that one way to avoid
AMT is to reduce TMT. Another way is to increase RT.
Notice that only reducing TMT will actually save you
any money. Increasing RT will reduce AMT but will not
save you a dime (and if you increase it enough, you'll
even increase what you have to pay the IRS).

In my continued tilting at windmills, I think the IRS
should issue a Form 1040-AMT, Sched A-AMT, etc. to make
it clear that a separate, parallel system is involved,
instead of forcing people to reconcile all the differences
between the two systems on a single, ill-explained form (6251).

(2) It depends how moderate your income is. For example, if you
are single, and have not exercised any ISOs, then if your
adjusted gross income (last line on front side of 1040) is
less than $40,250, it is just about impossible for you
to be subject to the AMT no matter what. On the other hand,
a couple of years ago there was a story about a man who only
made around $55,000 but got hit by the AMT because he had
7 kids (personal exemptions are disallowed when computing
the TMT).

If you want to see how much of an "AMT cushion" you have,
fill out Form 6251. If you haven't exercised any
ISOs or taken any depreciation/depletion/etc. deductions,
the form is actually not that bad to fill out. You'll
very likely only have to deal with lines 1-7 and 28-35,
all of which are pretty self-explanatory. Compare lines
33 and 34 -- you'll see how close to your RT your TMT is.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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You are right. I pay about $15,000 a year in property taxes, and would
love to be able to deduct it from my taxable income. I can, in the regular
calculation, but it is added back to my income for the AMT calculation.
In fact it is currently the *only* reason I am in AMT.
Joe