Home Mortgage and Investment Interest Deductions
Home mortgage interest and investment interest both are deductible in computing the Regular Tax, although certain limitations apply. The Alternative Minimum Tax similarly allows these deductions, but they are subject to differences in the limitations. Understanding these differences will allow a taxpayer to plan in advance to minimize [...]

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Investment – Private Activity Bonds
Municipal bonds, or “muni bonds” as they are commonly referred to, offer favorable tax treatment in that the interest earned on them is not subject to tax. This tax-free yield can make them an attractive investment. If an investor is not careful, however, the AMT can apply to make [...]

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Investments – Capital Gains
Capital gains are income derived from the sale of property, most typically investment property. While capital gains are not directly an AMT preference item, they do have an impact on a taxpayer’s Alternative Minimum Tax, and, therefore, are an essential element of AMT planning. One real-life scenario with which the [...]

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IRS Publication 17 and the Alternative Minimum Tax
Among the many forms and publications the IRS continually updates, including Form 6251, Alternative Minimum Tax – Individuals, each year the IRS reissues its massive Publication 17, entitled Your Federal Income Tax. This is, in essence, a master guide to everything you need to know about individual [...]

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Incentive Stock Options (ISOs) – Part 2
An individual holding an Incentive Stock Option to acquire his employer’s stock, and considering taking advantage of this fall’s run-up in the price of that stock, needs to be planning for the potential Alternative Minimum Tax impact. Time is important – Dec. 31 is fast approaching, and after [...]

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Incentive Stock Options (ISOs) – Part 1
There are many different ways an employer can award an employee with equity, or stock ownership, in the company. Briefly explained below are the ones commonly used for this purpose. Critical to planning for the Alternative Minimum Tax, the employee must first know exactly what form of [...]

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State Income Tax Refunds – AMT Adjustment
The AMT adjustment for State Income Tax Refunds, line 8 on Form 6251, is a reduction to your Alternative Minimum Taxable income. There isn’t much a taxpayer can do about this other than to understand just a little bit of what is going on.
Just for fun, let’s start with [...]

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Limitation on Itemized Deductions – AMT Adjustment
Depending on a taxpayer’s level of Adjusted Gross Income (“AGI”), the total amount of all the itemized deductions shown on Schedule A of the Form 1040 may not be deductible for Regular Tax purposes – a reduction may apply. For 2009, this AGI level is $166,800 for all [...]

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Personal Exemptions
A personal exemption deduction is allowed for a taxpayer, a spouse and any dependents such as children and other relatives. The amount for 2009 is $3,650 for each exemption, but this amount is reduced if the taxpayer’s Adjusted Gross Income (AGI) exceeds a certain amount.
In calculating the Alternative Minimum Tax, however, no deduction is [...]

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Standard Deduction
A taxpayer has a choice of itemizing deductions or taking the Standard Deduction in computing his Regular Tax liability. The Standard Deduction is a fixed dollar amount that varies depends on filing status. In tax year 2009 it is $5,700 for Single and $11,400 for Married Filing Jointly – what we’ll call [...]

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