Mark Bole <makbo[at]pacbell.net> writes:

- quote -

If you are the AMT exemption phaseout zone, your ordinary AMT income
will be subject to the 26% rate or the 28% rate (the phaseout zone
straddles the AMT brackets). The phaseout is losing $25 of AMT exemption
for every $100 you're over the threshold. Therefore, if your ordinary
AMT income is in the 26% bracket, the phaseout increases your marginal
rate by $25/$100 * 2600bp = 650bp. If you're in the 28% bracket, your
marginal rate is increased by $25/$100 * 2800bp = 700bp.

In other words, if you're in the 26% AMT bracket and in the phaseout
zone, then the actual marginal rates you will experience are:
Ordinary income = 26% + 6.50% = 32.50%
LTCG = 15% + 6.50% = 21.50%

And if you're in the 28% AMT bracket and in the phaseout zone,
the actual marginal rates you'll experience are:
Ordinary income = 28% + 7% = 35%
LTCG = 15% + 7% = 22%

A few years ago David Cay Johnston at the NYT did a tax piece
about this very thing. Dunno if it's available in the free
archives or not.

--
Rich Carreiro rlc-news[at]rlcarr.com

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removeps-groups[at]yahoo.com posted:

(Note: major redaction.)

- quote -

I keep noticing these references to 2010 -- as if it were the "promised
land."

What congresscritters have given, they may take away. Shouldn't we
always add a qualifier, such as "under current law"?

Seems very likely the 2010 rules will be revised once the new
administration gets around to revising tax law -- which will probably be
sooner, rather than later.

Bill

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Seth wrote:
- quote -

Do you mean, higher than the regular tax marginal rate? I recall in
recent years graphing results where the two lines (regular vs. AMT)
dance with each other over a large range...

-Mark Bole

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In article <gfieov$icl$1[at]feeder.motzarella.org> , jack <jack[at]yahoo.org> wrote:
- quote -

Due to the phaseout, there's a large range where the actual marginal
rate is quite a bit higher.

Seth

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On Nov 13, 4:21 pm, "jack" <j...[at]yahoo.org> wrote:

- quote -

For many people, the mortgage interest deduction is the biggest
deduction, and it is allowed. The home equity deduction may be
limited (I think it is allowed if you used it to purchase or improve
your main or second home). For some people, charitable contributions
are the largest, and they are allowed under AMT. For some odd reason,
part of the medical deduction is subject to AMT.

- quote -

Long term gains and qualified dividends are still taxed at 15%.
However, these items increase AGI, and therefore reduce the AMT
exemption (or rather they increase the phaseout of the exemption).
Thus, you may end up paying 28% on your entire AMT taxable income
without any exemption. For this matter, these items also reduce the
normal exemption and itemized deduction by increasing the phaseout
(but in 2010 itemized deductions will not be phased out).

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Mark Bole wrote:

- quote -

I know your statement above is correct, but since the cap gain is added
to income and AMT rises, there comes the feel of the LT cap gain rate
being treated as though it were 22.5%. i.e. when in the AMT zone, add
$10,000 of LT cap gain, and however the calculations ripple, I see a
rise in tax due of $2250. Thus my inclination to remark "20% cap gain
rate? so what? I pay 22.5% now".

This is in a similar category to my 'phantom tax rate' created by the
incremental taxing of social security.

Joe

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jack wrote:
- quote -

Taxes-paid deductions are lost (and state tax refunds are generally not
taxable if they resulted from a year when AMT was paid). Miscellaneous
2%-of-AGI deductions are lost. Medical deductions and mortgage interest
deductions are more limited. Most other itemized deductions are allowed.


- quote -


No. AMT still allows regular capital gains rates, although basis may be
different. W-2 income receives no special treatment, it is lumped with
your other ordinary income. AMT is essentially a flat tax with a
relatively high exemption amount (based solely on filing status, not the
number of persons claimed under regular tax) and no standard deduction.

- quote -


Fundamentally, as corrected above. There are lots of other details,
involving depreciation, foreign taxes, incentive stock options, etc.

Also, some regular tax credits are not allowed under AMT, exactly which
ones are frequently subject to tinkering by Congress (for example, up
until the last minute, the Hope/Lifetime Learning education credits were
not going to be allowed to reduce regular tax below AMT for 2007).

-Mark Bole

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AMT has two basic provisions:

1) Most deductions are lost.(specifially state income tax and real estate
tax)
2) The tax rate becomes 26/28% So W2 income is taxed less, but long term
capital gains goes up.

Is that fundamentally it, or am I misunderstanding it still. I know there
is a AMT deduction, but other than that...

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