The Alternative Minimum Tax was developed in 1969 as a way of keeping the wealthy from avoiding tax payments. Today, the burden of the AMT goes far beyond the rich. Many other taxpayers are being strained by the AMT because its rates have not changed while tax brackets, deductions, and exemption amounts have been adjusted for inflation.
The AMT taxes you at 26% or 28%, but this is an addition to your regular tax. In order to avoid AMT as much as possible, you need to determine if you will be affected by it in the coming income tax return.
Your tax strategy, in essence, must be reverse that of a normal tax strategy. A normal tax strategy is to postpone income and increase deductions. Your strategy, to avoid AMT, is to increase income and defer deductions.
One way you can deflect the sting of the AMT is to delay paying state taxes. Such a delay will probably cause a penalty. You must decide if the AMT savings it will provide offsets that penalty.
Try and adjust the timing of certain income factors such as implementing stock options and selling stock.
Seriously consider your state and local tax load. State taxes play a large roll in determining Alternative Minimum Tax because under the AMT, state taxes are not deductible. Some states like New York, Massachusetts, and California have particularly high taxes. Other states, like Texas, Nevada, and Florida have lower taxes. Living in a state with lower taxes will help you to more easily avoid the Alternative Minimum Tax.
Capital gains can seriously impact your Alternative Minimum Tax exemption. Always consider the implications of the Alternative Minimum Tax before you decide to realize any capital gains.
If you have Incentive Stock Options, it is best to exercise them intermittently. A number of ISOs exercised in one year will certainly cost you much more in AMT than spreading those ISOs over a couple of years.
While it is true that you cannot change the timing of interest income, an investor could, conceivably, change the amount of dividend income earned by changing the strategy of investing. Please note that some income that is not taxable under regular taxes is taxable under the AMT.
These ideas might help to lower your AMT for this year, but you need to decide what makes the most sense for you in the long haul. Talk to a tax expert to determine what strategies you should put in place to lessen the sting of the AMT.
The alternative minimum tax affects most of the taxpayers. It tries to catch people who are trying to escape the tax obligations under various tactics. But then you can produce the effect of AMT with some effective strategies. Do you know some of them? Chintamani Abhyankar provides useful tips.
The AMT taxes you at 26% or 28%, but this is an addition to your regular tax. In order to avoid AMT as much as possible, you need to determine if you will be affected by it in the coming income tax return.
Your tax strategy, in essence, must be reverse that of a normal tax strategy. A normal tax strategy is to postpone income and increase deductions. Your strategy, to avoid AMT, is to increase income and defer deductions.
One way you can deflect the sting of the AMT is to delay paying state taxes. Such a delay will probably cause a penalty. You must decide if the AMT savings it will provide offsets that penalty.
Try and adjust the timing of certain income factors such as implementing stock options and selling stock.
Seriously consider your state and local tax load. State taxes play a large roll in determining Alternative Minimum Tax because under the AMT, state taxes are not deductible. Some states like New York, Massachusetts, and California have particularly high taxes. Other states, like Texas, Nevada, and Florida have lower taxes. Living in a state with lower taxes will help you to more easily avoid the Alternative Minimum Tax.
Capital gains can seriously impact your Alternative Minimum Tax exemption. Always consider the implications of the Alternative Minimum Tax before you decide to realize any capital gains.
If you have Incentive Stock Options, it is best to exercise them intermittently. A number of ISOs exercised in one year will certainly cost you much more in AMT than spreading those ISOs over a couple of years.
While it is true that you cannot change the timing of interest income, an investor could, conceivably, change the amount of dividend income earned by changing the strategy of investing. Please note that some income that is not taxable under regular taxes is taxable under the AMT.
These ideas might help to lower your AMT for this year, but you need to decide what makes the most sense for you in the long haul. Talk to a tax expert to determine what strategies you should put in place to lessen the sting of the AMT.
The alternative minimum tax affects most of the taxpayers. It tries to catch people who are trying to escape the tax obligations under various tactics. But then you can produce the effect of AMT with some effective strategies. Do you know some of them? Chintamani Abhyankar provides useful tips.