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Posted by frank1492 on April 9, 2007, 3:10 am
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This issue has been raised in other threads, but I'm not
sure I have ever seen exact answers to the following
questions.
For the past two years my income has been unusually large,
due to the sale of shorefront property in a state other than
my home state. Obviously this had tax ramifications in both
states. Being somewhat naive, I went ahead and listed the
large taxes as deductions. My AMT was several thousand
dollars in each year. (None next year I presume as my
income and property taxes return to "normal" levels.) I
have already filed my tax return for this year, and
obviously last as well.
I focus first on whether or not the law says (or implies)
that once you have chosen to itemize, you then have an
obligation to itemize fully. So my first question is: Do
you? (Although I gather not.)
If possible, for example, to understate state taxes, my next
question is under what circumstances would benefit to the
AMT accrue? I currently have a refund of $301. As an
extreme test, using TurboTax, I reduced my state taxes to
zero to see what would happen. The result was an amount due
of over $1300. (My AMT of course went to 0.) Obviously
there was no benefit to completely omit my state taxes as
deductions, which again I would have guessed.
If I looked at various levels of understatement, however,
would there have been some level at which there would have
been benefit to such understatement? If understatement is
allowable, would there have been great benefit to finding
that "critical level" that would have minimized my total
tax? Or would that benefit have been relatively small?
I realize that computation of AMT is complex and you don't
have exact figures, but I'm just looking for a rule of thumb
as well as perhaps some consolation that I haven't paid much
more than I needed to.
Thanks very much for your help!
Frank
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Posted by Bill Brown on April 12, 2007, 12:06 am
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> This issue has been raised in other threads, but I'm not
<<SNIP>>
>
> I realize that computation of AMT is complex and you don't
> have exact figures, but I'm just looking for a rule of thumb
> as well as perhaps some consolation that I haven't paid much
> more than I needed to.
Here's a rule of thumb for those impacted by AMT. Nothing
you can do will lower your total tax liability. If you
eliminate enough deductions so that AMT is zero, your
regular tax will have increased to the point that it equals
or exceeds what your liability would have been with that AMT
impact.
<< ------------------------------------------------------- >>
<< 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 (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by L K Williams on April 12, 2007, 12:06 am
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snip
> I realize that computation of AMT is complex and you don't
> have exact figures, but I'm just looking for a rule of thumb
> as well as perhaps some consolation that I haven't paid much
> more than I needed to.
As a general rule, if you become subject to the AMT, there
is little you can do to reduce the TOTAL tax bill. If you
limit deductions, you will have a higher regular tax and a
lower AMT. However, it is usually a dollar for dollar
exchange. For each dollar you increase preference items,
you increace the AMT by an equal amount.
That's exactly what the AMT was intended to do: to insure
that taxpayers either pay a certain amount of regular tax or
become subject to the AMT.
Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
<< ------------------------------------------------------- >>
<< 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 (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
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