Ways to avoid Internal Revenue Service Alternate Minimum Tax?

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  • Anonymous
    1 decade ago
    Favorite Answer

    V. B. is mistaken about "make less money."

    While the AMT was INTENDED to strike super-wealthy taxpayers, its often called the stealth tax because it sneaks up on so many unsuspecting people. Indeed, it is by far one of the most dreaded provisions in the tax code. You're likely to confront the AMT, for example, if you make $100,000 or more a year -- or if you make $75,000 and write off such mundane things as state taxes and interest on a home-equity loan. The AMT isn't about how much you earn, really; it's about making sure that no one has so many deductions and credits he doesn't pay some tax.

    The larger problem is personal and dependent exemptions, the standard deduction, state and local taxes, and miscellaneous itemized deductions. In fact, the IRS estimated that in 2007, nearly 95 percent of AMT revenues was attributable to these fairly common deductions.

    The characteristics most likely to give rise to AMT liability for "ordinary" taxpayers who do not operate businesses are:

    A large number of personal exemptions

    A large amount of state and local taxes paid

    A large amount of miscellaneous itemized deductions

    A large amount of deductible medical expenses

    The bargain element of incentive stock options

    A large amount of capital gains

    Hope this helps!

    Source(s): Tax practice, retired lawyer
  • Anonymous
    1 decade ago

    Make less money.

    Don't have the kind of tax return that has different numbers on the AMT form than on the 1040 (private activity bond interest, too many kids, too many unreimbursed business expenses, move to a lower tax state, don't exercise ISOs and then not sell the stock), etc.

    I stand by my "make less money" issue. I was being sarcastic. AMT is there. You hit it, you hit it. I've seen someone who made $40K pay it because they filed MFS and had owed nothing on the 1040 because they had a bund of kids, but owed on the AMT form because you can't claim dependents and the exemption is $35K for MFS.

  • 1 decade ago

    Don't itemize deductions. That is what triggers the AMT. They are looking ( in the original spirit of the rule) for people who make $1Million but "write-off" $1Million and pay nothing.

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