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 Sean Coffey on July 26, 2009, 6:34 pm Please log in for more thread options On Jul 25, 12:17 pm, kam...@panix.com (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. 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. > -- Eh? That's not how it should work for mortgage interest. Mortgage interest isn't an AMT preference item (apart from on home equity loans in some circumstances). Increasing any interest on a mortgage used to acquire the home should not increase AMT. It sounds as if something is being entered incorrectly. I use TurboTax so I'm not sure how TaxAct processes this. Also it is never true that increasing Schedule A deductions will increase AMT Income. If the Schedule A deductions are AMT preference items, then increasing the Schedule A deductions will not decrease AMT Income, but it won't increase it either. Form 6251 will just add the extra amounts deducted back in, and AMT Income (line 29 on the 2008 Form 6251) will be the same. > > 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 D. Stussy on July 26, 2009, 6:33 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? Interest on acquisition/construction debt (up to $1M in principal) is deductible for AMT purposes too. Therefore, it will not affect the computation. There are other things that WILL affect your AMT computation, including property 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 Mark Bole on July 27, 2009, 2:50 pm Please log in for more thread options D. Stussy wrote: > There are other things that WILL affect your AMT computation, including > property taxes. Right... as Art Kamlet and others have mentioned in the past, before you start playing "what-if" with tax software, it's best to have *everything* affecting your return completely entered, and then change just *one* thing at a time. Since this is the OP's first house and presumably first mortgage, he's probably never received a 1098 (Mortgage) statement before, and may not even be distinguishing correctly between principal, interest, PMI, and escrow amounts. And one more thing, for the OP if he is still reading: don't forget to check your eligibility for the $8,000 first-time home buyer's credit. -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 Tobi on July 27, 2009, 2:59 pm Please log in for more thread options > > > > We just bought our firsthouseand therefore I wanted to check how the > >interestwould 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 thealternativeminimumtax. > > > It seems that if I put in a few thousand $ forinterestpaid, mytax > > goes down and I owe a bit less. However, when I increased the $ of > >interestpaid, I got to the point where my refund doesn't change and > > noticed that while thetaxgoes 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? > > Intereston acquisition/construction debt (up to $1M in principal) is > deductible for AMT purposes too.  Therefore, it will not affect the > computation. > > There are other things that WILL affect your AMT computation, including > property taxes. Thanks all for your comments. I tried turbotax yesterday and the full amount of interest was tax deductible. i went back to taxact but didn't see where I might have made a mistake, so that is still puzzling. At least I have confirmation that TurboTax seems to work as I had thought before we bought the house. -- << ------------------------------------------------------- >> << 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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