NW wrote:

- quote -

This would help now, maybe not when you retire.

- quote -

This may help when you retire, but not now.


- quote -

Are you just trying to get an extra AMT deduction here? It seems silly
to pay $1.00 in interest to save 26 (or 28) cents in taxes (I say this
because it sounds like you could just pay off both loans).

-Will

beliavsky[at]aol.com wrote:
- quote -

B-
The article you cited seems to be referring to the phase-out of the AMT
exemption, which would result in a higher effective long-term capital
gains rate for marginal capital gain dollars above $150k and below $382k.

Under AMT, on a 2005 MFJ return, the first $58k of AMTI is free from
tax, and the 26% rate applies beginning at that point. Above $175k in
AMTI the rate is 28%. Throughout, qualified dividends and capital gains
are taxed at 15%, because they don't get hit with the AMT rates.

But the $58k exemption begins to phase out at $150k, 25 cents for every
dollar above $150k in AMTI - even if the income is capital gain income.
At $382k AMTI it's gone, and all of your AMTI is subject to tax.

I'm not sure how they're getting 22% but each dollar of capital gain in
the $150k-$382k income range pushes an additional 25 cents of income
into AMT. So that marginal capital gain dollar above $150k is taxed at
15%, plus it forces another 25 cents to be taxed due to the phase-out of
the exemption. That and a little rounding gets you to 22% I think.

-Tad

beliavsky[at]aol.com writes:

- quote -

Yes.

- quote -

When you're in the zone, you lose $0.25 of AMT exemption for
every additional $1 of AMT AGI.

So, that extra $100 of dividends lowers your AMT exemption by $25.
You get taxed $15 on the dividends and the $25 reduction in the
exemption causes another $25 of non-div income to be taxed at 26%,
which gives you $6.50 of additional tax there.
$15 + $6.50 = $21.50 = 21.15% marginal rate


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

beliavsky[at]aol.com wrote:

- quote -

I had clients who fell into this exact scenario this year. I was
surprised that AMT was triggered, but I haven't had time to work
through the calculations on a line-by-line basis. If I can figure
out the 22% riddle, I'll post it here. My off-the-top guess would
be that this is simply the result you get if you allocate ALL of
the resulting AMT to the capital gain income for percentage rate
calculation purposes. Whether such an allocation has validity
outside of the realm of political soundbites is, I suppose, a
matter of conjecture. <grin
MTW

I don't understand the tax code well enough to give AMT advice, but I
have a question regarding investment income and the AMT.

It says at http://www.taxpolicycenter.org/newse..._guide_may.cfm
that

"The more long-term capital gains and qualified dividend income you
have, the more likely you are to be thrown into the AMT. While the AMT
theoretically taxes gains and dividends at just 15%, you could end up
paying 22%. This hidden rate increase hits couples whose AMT income is
between $150,000 and $382,000 a year."

(1) Is is true that qualified dividends and long-term capital gains can
effectively be taxed at a rate higher than 15%?

(2) Since the AMT has two tax brackets, 26% and 28%, where does the 22%
number come from?

NW wrote:

- quote -

I'm not sure that I understand this. Exercising NQ options
makes the person doing it subject to ordinary income tax
on the spread. This would actually increase the ordinary
income tax paid, and therefore reduce AMT liability (by
increasing the income).

Maybe you meant ISOs. When ISOs are exercised, the spread
is only subject to AMT.

Anoop

So maybe a lot of us thought we'd never earn enough to worry about AMT. What
would be the threshold in 2006? I guess I need to know early whether this is
something I need to plan for.

Elizabeth Richardson

"NW" <nowhere[at]noplace.com> wrote in message
news:C0y8e.24998$1p4.4226[at]trndny06...
- quote -

The AMT net will be larger for 2006 unless tax law changes are made. Since
there's no time like the present, I'd like to start implementing a strategy
that will help to keep me out of ATM territory, and lower my tax liability
in general. Below are some things that seem obvious to do. Are there
others that should be considered? Since the AMT is paid if it's higher than
the 'normal' way of computing tax, do these represent an exercise in
futility?

- Max out on 401k contributions
- Max out on Roth IRA contributions
- Consider parking my emergency fund in a non-taxable vehicle like munis for
a NT MM.
- Exercise my NQ option in 2005, not 2006
- Use a home equity loan to pay off my mortgage and serve as a car loan. (I
understand the risk)