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Posted by Seth on April 9, 2008, 9:42 pm
Please log in for more thread options >On Apr 8, 3:18 pm, se...@panix.com (Seth) wrote:
>
>> If he's a little or a lot into AMT, it's worth $280. If he's in
>> between, $350 (I think the phaseout is 25%).
>
>You're right. I initially thought that charitable contributions are
>not allowed under AMT, but they are (as no line on that form asks you
>to add it back), so I stand corrected. So the tax savings will be as
>you say above.
>
>Furthermore, I plugged numbers into my tax program and then I saw line
>29 of form 6251 (the AMT exemption). Because the AMT income (line 28)
>is less by $1000, the AMT exemption (line 29) is phased out less and
>will be greater, meaning that less of your income is subject to AMT.
>In my scenario (single filer, 200k income, CA tax 17k, no donations)
>line28=200000, line29=22475. With a 1k donation, line28=199000,
>line29=22725. Bottom line is that without the donation net tax is
>46207; with the donation it is 45857, and net savings is 350 or 35%.
>(Note that this person (with 17k of CA taxes) had itemized deduction
>phaseout.) Yet the person's tax bracket is 33%.
There's a relationship between the nominal tax bracket and the
effective tax bracket.
If there's a phaseout in effect, effective = nominal / (1-phaseout).
For most people towards the bottom of the AMT range, the effective
marginal rate is 35%.
Seth
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