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Posted by ed on June 13, 2008, 4:03 pm
Please log in for more thread options On Jun 13, 1:38 pm, "removeps-gro...@yahoo.com" <removeps-
gro...@yahoo.com> wrote:
> On Jun 13, 10:27 am, derk...@gmail.com wrote:
>
> > 270k state tax for 2007 paid in 2008, and to deduct against 2008
> > income.
> > q1: 75k cap gains, paid 20k(fed)+8k(state) est tax
> > q2: 85k cap gains, cintemplating paying 25k(fed) and 8k(state) est tax
> > q3: maybe similar
> > q4: maybe similar
>
> If that's all there is to it, it will be easy with any regular tax
> program. For Q1, just multiply 75*4=300 for annualized AGI.
> Calculate the state tax quarterly payment first, probably something
> like 22.5%*10%*300k=6750 in California and pay it. Of course, there
> are deductions, AMT, mortgage interest, etc to consider. Then
> calculate the federal Q1 installment; use the state Q1 paid times four
> (to annualize the itemized deduction) as well as the 270k paid for
> last year.
>
> As your income is pretty high, you could just pay a pro 1k to 2k to
> take care of it as well as some financial planning. For example, if
> you don't take any capital gains in Q2, Q3, Q4 then you probably will
> get the full benefit of the 270k deduction as you likely won't be in
> AMT (and you'll even get the stimulus credit for your 2008 federal
> return). On the other hand, your income might be so low that part of
> the 270k will be forever lost. And besides, you might need some
> money.
>
> > Should I just pay it and get it over with? Is there any big downside?
> > I don't expect to get much more than 2% on this cash anyway, so
> > maybe I should just pay as if I didn't have the big deduction and
> > get it over with. What interest rate will IRS pay me on
> > overpayment :-)?
>
> If you overpay your Q1 installment or any installment, you don't get
> any interest. Muni mutual funds may give a better return than the 2%
> of banks, though there is some risk if the bond price falls.
The following assums no other income, $75,000 long term capital gain
in the first quarter and $85,000 in the second quarter, a total of
$270,000 state tax paid in the first quarter and too much tax to uses
the "Last years tax safe harbor" Filein married file jointly with only
2 exemptions (athough as you'llsee this doesn't make any difference).
The $270,000 State Tax as an itemized deduction actully wipes out all
your regular tax leaving you with only AMT without the benefit of the
$270,000 deduction, or ROUGHLY as follows
First Quarter LTCG $75,000 annualized * 4 = $300,000, minus only
$7,500 of AMT Exemption leaving taxable AMT of $292,500 of which
$66,100 is taxed at 0% and the remainder of $226,400 taxed at 15% for
amt tax of $33,960 * .225 =$7,641 for the first quarter installment.
You paid $20,000 so no penalty. The second quarter works out to
$13,187 tax for a total cumulative due of $21,458. So you only owe
$1,458 for a second installment.
ed
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