Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Falling Victim to AMT

Posted by taxguru on March 1, 2006

Q:

Subject: The AMT Tax

Mr. Kerstetter, Thank you for your website.  As always it is informative and enjoyable.  I have a quick question about the AMT.  At what income level should a family begin to worry about this tax applying?  As a side note, I am most assuredly working with a professional. 

This question is driven by a conversation I had with a good friend I work with.  He is the controller here and he believes I am getting close to falling into this bracket.  I on the other hand don’t think I am anywhere close.  Is there a general number to look for?

Once again, thanks any help you may offer.

Respectfully,

 

A:

There is no really simple answer for that. 

It’s not to be funny that I constantly refer to the AMT as an insane tax.  The extremely convoluted way in which it is calculated, as well as the fact that the thresholds haven’t been

If you take a look at the actual AMT Form 6251  you can see that the tax could conceivably kick in for singles with AMTI of $40,250 and married couples with AMTI of $58,000.  This is actually another example of the marriage penalty built into our tax code.

As I said, it really requires a computer to calculate AMT correctly.  You will generally find that it hits you more when you have high Schedule A deductions.  When it shows up on a client’s tax return, I work with the client to see if we can find ways to legitimately move any of those deductions from Schedule A to an above the line schedule, such as C, E or F, where they are more effective in reducing both TI and AMTI.

Good luck.

Kerry Kerstetter

 

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