Bhoot Nath wrote:
- quote -

Sorry to hear that. I've been nudging the 9.3% bracket
for 2003 and 2004, but I feel your pain. Remember, though
that the phaseout of Federal itemized deductions is
backed out for your AMT calculations, and, IIRC, the
personal exemption is now allowable for AMT, so you
may have made a mistake in your calculations.

....

- quote -

Perhaps. But it won't affect your total Federal tax
payment. It may increase your California taxes still
further, if you itemize for CA purposes and are not
subject to CA AMT.

- quote -

Ditto.

As you have no AMT income timing issues, there's no
benefit TO claiming the deductions, either....

--
This account is subject to a persistent MS Blaster and SWEN attack.
I think I've got the problem resolved, but, if you E-mail me
and it bounces, a second try might work.
However, please reply in newsgroup.

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"Bhoot Nath" <deja_bhoot2000[at]yahoo.com> wrote:

- quote -

The answer is no you're not required to deduct all possible
itemized deductions.

BUT....how does that change the bottom line? You pay the
higher of your income tax and minimum tax. You start with
federal taxable income for minimum tax. As far as I can
figure in my head without looking at a model, you're final
TAX number will be the same if not worse.

Put it this way, can you run the numbers as you propose and
get a better result, AMT or not?

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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deja_bhoot2000[at]yahoo.com (Bhoot Nath) writes:

- quote -

Even if you're allowed to take either of those options,
neither of them will change your tax situation at all.

Or more precisely, they'll reduce the amount on the "AMT"
line of your 1040, but they won't reduce the amount on the
"Total tax" line of your 1040.

The thing you have to keep in mind is that the AMT is not
just an "add-on" tax. The AMT is an entire, separate,
parallel tax system, whereby you compute your tax under the
regular tax system, compute your tax under the AMT system,
and pay the difference.

The way this is *reported* is that you compute your regular
tax (RT) on 1040. Then you use 6251 to compute your
tentative minimum tax (TMT). If the TMT is greater than the
RT, then the difference between them goes on the "AMT" line
of 1040. Note that what this does is make your total tax
equal to the TMT.

Just to make things concrete, let's pretend that your RT is
$40,000 and your TMT is $48,000, which means that the "AMT"
entry on 1040 will be $8,000 ($48,000-$40,000=$8,000), and
you will pay a total of $48,000 in federal income tax.

Now consider what will happen if you (for example) don't
claim $10,000 of your CA tax on your return:

* The TMT will stay at $48,000 (since the CA tax isn't a
deduction when computing the TMT).

* The RT will increase by approximately $3,000 (assuming
you're in the 30% bracket), since decreasing your
deductions by $10,000 increases taxable income by $10,000,
and will result in a regular tax of $43,000.
* The difference between TMT and RT is now $48,000-$43,000
= $5,000, and that will be the "AMT" entry on 1040.

So, the "Tax" line of 1040 will now be $43,000, the "AMT"
line will be $5,000 and the "Total Tax" line will remain at
$48,000.

Again, the thing to remember is that the "AMT" line on 1040
is not an standalone quantity. It is simply the amount that
must be added to the RT to arrive at the TMT. That means
that reducing the "AMT" line in no way implies you'll pay
less tax. Stop thinking in terms of the "AMT" line. Think
in terms of the RT and the TMT and it'll all be much
clearer.

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

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I am one of the "lucky" California residents who pays state
taxes at a high rate of 9.3% and that pushes me in AMT
territory for federal taxes.

My Fed taxes has only following entries:
-- Wages (self & spouse)
-- Interest & dividend less than $3000
-- Personal exemptions
-- Schedule A (itemized deduction): only entries are:
CA income tax, property tax and mortgage interest

That's it. No complications, no tax shelters, no incentive
stock options, nothing. Yet, I am now subject to Federal
AMT! None of the items on the above list are something that
I can choose to delay payments (e.g., property tax has to be
paid by early December; mortgage can be paid early but not
delayed to next year; etc.)

Q1. Can I choose to NOT claim the property taxes on my
schedule A?

Q2. If pay 20K to California, can I choose to NOT CLAIM a
portion of that as a deduction on my federal taxes?

It seems like both these options would reduce my AMT
liability.

Thanks a lot for your assistance.
Bhoot Nath

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