House Interest - Alternative Minimum Tax

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Subject Author Date House Interest - Alternative Minimum Tax Tobi 07-25-2009  Re: House Interest - Alternative Minimum Tax Arthur Kamlet 07-25-2009  Re: House Interest - Alternative Minimum Tax Mark Bole 07-25-2009  Re: House Interest - Alternative Minimum Tax Bill Brown 07-25-2009  Re: House Interest - Alternative Minimum Tax Mark Bole 07-26-2009  Re: House Interest - Alternative Minimum Tax Bill Brown 07-26-2009  Re: House Interest - Alternative Minimum Tax Mark Bole 07-26-2009  Re: House Interest - Alternative Minimum Tax Bill Brown 07-26-2009  Re: House Interest - Alternative Minimum Tax Mark Bole 07-27-2009  Re: House Interest - Alternative Minimum Tax Seth 07-28-2009  Re: House Interest - Alternative Minimum Tax Sean Coffey 07-26-2009  Re: House Interest - Alternative Minimum Tax D. Stussy 07-26-2009  Re: House Interest - Alternative Minimum Tax Mark Bole 07-27-2009  Re: House Interest - Alternative Minimum Tax Tobi 07-27-2009
Posted by Tobi on July 25, 2009, 3:04 pm Please log in for more thread options We just bought our first house and therefore I wanted to check how the interest would change our taxes. I put in some guesses on my 2008 taxact return to simulate what I would expect for my 2009 return and stumble across the alternative minimum tax. It seems that if I put in a few thousand $ for interest paid, my tax goes down and I owe a bit less. However, when I increased the $ of interest paid, I got to the point where my refund doesn't change and noticed that while the tax goes down, my AMT goes up. It seems that my refund is therefore stuck at a certain maximum value. Is that normal? Anything that I could do to lower my taxes? -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Arthur Kamlet on July 25, 2009, 3:17 pm Please log in for more thread options >We just bought our first house and therefore I wanted to check how the >interest would change our taxes. I put in some guesses on my 2008 >taxact return to simulate what I would expect for my 2009 return and >stumble across the alternative minimum tax. > >It seems that if I put in a few thousand $ for interest paid, my tax >goes down and I owe a bit less. However, when I increased the $ of >interest paid, I got to the point where my refund doesn't change and >noticed that while the tax goes down, my AMT goes up. It seems that my >refund is therefore stuck at a certain maximum value. Is that normal? >Anything that I could do to lower my taxes? Yes, once you have reached AMT territory, that's how it works. Use Form 6251 to determine AMT Income, and calculate the tentative minimum tax on that AMT Income. If you have no foreign tax issues or a few other rare issues, your Tentative Minimum Tax less Regular Income tax is the line item on form 1040 labeled AMT. So reducing regular taxable income by additional Schedule A Tax Itemized Deductions increases AMT Income, and as regualr income tax is lowered, AMT is raised. -- ArtKamlet at a o l dot c o m Columbus OH K2PZH -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Mark Bole on July 25, 2009, 11:19 pm Please log in for more thread options Arthur Kamlet wrote: >> We just bought our first house and therefore I wanted to check how the >> interest would change our taxes. I put in some guesses on my 2008 >> taxact return to simulate what I would expect for my 2009 return and >> stumble across the alternative minimum tax. >> >> It seems that if I put in a few thousand $ for interest paid, my tax >> goes down and I owe a bit less. However, when I increased the $ of >> interest paid, I got to the point where my refund doesn't change and >> noticed that while the tax goes down, my AMT goes up. > So reducing regular taxable income by additional Schedule A Tax > Itemized Deductions increases AMT Income, and as regualr income > tax is lowered, AMT is raised. Well, only *some* of the Schedule A deductions have this effect. Interest on home acquisition debt is typically fully deductible under AMT as well as regular tax. See thread "AMT Difference" on June 22nd in this newsgroup for a similar discussion. You may be incorrectly telling your software that your mortgage is all equity debt, interest on which is *not* deductible under AMT. Check to see if there is an entry on line 4 of Form 6251, if so then figure out where it is coming from. > Anything that I could do to lower my taxes? Probably not on this item, as there is very little *you* can do to increase the amount of interest you pay on your first mortgage short of refinancing. You can always pay your January 1st 2010 payment in December (13 months of interest in one year), but that only works for one year, some year down the line you will then only get 11 months of interest deduction in one year. -Mark Bole -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Bill Brown on July 25, 2009, 11:28 pm Please log in for more thread options > Arthur Kamlet wrote: > > In article > >> We just bought our first house and therefore I wanted to check how the > >> interest would change our taxes. I put in some guesses on my 2008 > >> taxact return to simulate what I would expect for my 2009 return and > >> stumble across the alternative minimum tax. > > >> It seems that if I put in a few thousand $ for interest paid, my tax > >> goes down and I owe a bit less. However, when I increased the $ of > >> interest paid, I got to the point where my refund doesn't change and > >> noticed that while the tax goes down, my AMT goes up. > > So reducing regular taxable income by additional Schedule A Tax > > Itemized Deductions increases AMT Income, and as regualr income > > tax is lowered, AMT is raised. > > Well, only *some* of the Schedule A deductions have this effect. > Interest on home acquisition debt is typically fully deductible under > AMT as well as regular tax. > > See thread "AMT Difference" on June 22nd in this newsgroup for a similar > discussion.  You may be incorrectly telling your software that your > mortgage is all equity debt, interest on which is *not* deductible under > AMT. > > Check to see if there is an entry on line 4 of Form 6251, if so then > figure out where it is coming from. > > > Anything that I could do to lower my taxes? > > Probably not on this item, as there is very little *you* can do to > increase the amount of interest you pay on your first mortgage short of > refinancing.  You can always pay your January 1st 2010 payment in > December (13 months of interest in one year), but that only works for > one year, some year down the line you will then only get 11 months of > interest deduction in one year. > Refinancing a mortgage does not convert home equity indebtedness into acquisition indebtedness. Getting cash out on a refinance and using the cash to pay for capital improvements on a personal residence (primary or one other) would increase acquistion indebtedness. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Mark Bole on July 26, 2009, 11:39 am Please log in for more thread options Bill Brown wrote: [...] >>> Anything that I could do to lower my taxes? >> Probably not on this item, as there is very little *you* can do to >> increase the amount of interest you pay on your first mortgage short of >> refinancing. > Refinancing a mortgage does not convert home equity indebtedness into > acquisition indebtedness. I was considering the case of refinancing an existing acquisition-debt mortgage at a higher interest rate, for example by extending the term of the loan. Or, even if he did a cash-out refinance, while the additional debt might be equity debt, it could also result in increased interest on the acquisition-debt balance as well. What I didn't spell out to the OP, but will try to now, is that there is little point in putting in "guesses" as to mortgage interest expense. With few exceptions (variable-rate adjustments, or the one-time "pay January in December" technique), the annual mortgage interest is a fixed, known quantity that he can either calculate himself or ask the bank to do so (by providing an amortization table). I didn't understand why he was running through what sounded like "what-if" scenarios using his mortgage interest. <soapbox> With all the "home ownership = American dream" propaganda of the last fifty years, people often forget that it's much better to pay less interest in the first place than it is to pay more interest with a partially offsetting discount on taxes. </soapbox>. -Mark Bole -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted Any Way to Avoid Alternative Minimum Tax on Stock Options Exercised in 2008? 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