Walloch 2 MINS. Newsletters Subscribe for original insights, commentary and analysis of the issues facing the financial advice community, from the InvestmentNews team. Recent Articles by Author. Tax proposal has silver lining for IRAs, Social Security and capital loss limits Situation: When your clients ask whether anything good will come out of proposed tax legislation, you can point….
Status of the AMT patch Your clients are sitting on the edge of their seats, anxiously awaiting word of how the alternative minimum tax will affect them. Estate tax proposal looks to maintain current exemptions Your clients have probably been asking about the estate tax because it is scheduled to sunset in and then rise again in at higher rates. Latest news. Regulation January 13, Significant progress made on advocacy priorities of our industry.
Remember, with TurboTax , we'll ask you simple questions about your life and help you fill out all the right tax forms. With TurboTax you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation. Answer simple questions about your life and TurboTax Free Edition will take care of the rest. For simple tax returns only. Tax Exemptions and Deductions for Families. What are Tax Exemptions? Filing Your Taxes Late. Estimate your tax refund and where you stand Get started.
Easily calculate your tax rate to make smart financial decisions Get started. Know how much to withhold from your paycheck to get a bigger refund Get started. Estimate your self-employment tax and eliminate any surprises Get started.
Know which dependents credits and deductions you can claim Get started. Know what tax documents you'll need upfront Get started. See which education credits and deductions you qualify for Get started.
See how much your charitable donations are worth Get started. The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Skip To Main Content. Why does the AMT exist? What is the Alternative Minimum Tax? Why would I have to pay the AMT? How can I avoid the AMT?
What happens to my tax credits? How can I plan ahead for the AMT? What are the AMT exemption amounts? The AMT exemption amounts are now indexed to rise with inflation.
To figure out whether you owe any additional tax under the Alternative Minimum Tax system, you need to fill out Form If the tax calculated on Form is higher than that calculated on your regular tax return, you have to pay the difference as AMT in addition to the regularly calculated income tax. It can result in you paying hundreds or even thousands of dollars in additional taxes. Look for entries on lines 2 and 3, which adjust your taxable income for AMT purposes.
For instance, you have to put various items back into your income, adding such items as your standard deduction, taxes deducted on Schedule A, the bargain element of any incentive stock options you exercised, as well as several investment related items. How can I escape the AMT? Perhaps you can qualify for a home office, which would allow you to deduct part of your home real estate tax on Schedule C.
If you have a farm operation and use your car in your work, you might be able to deduct the personal property tax on the car on Schedule F. If you have vacant land on which you are paying real estate taxes, you could turn it into a farm rental and deduct the taxes on Form The difference, if positive, is the Alternative Minimum Tax.
You add the positive difference, if any, to the your regular tax. If you have any of these credits, usually from a business entity or an investment, you should analyze Line 2 of Form to see what you can do to reduce your Tentative Minimum Tax and allow more credits.
Any general business credit not allowed generally may be carried back 2 years and carried forward 20 years. There are some things you can do to plan ahead for the Alternative Minimum Tax: Use tax-planning software such as TurboTax during the year to minimize your overall tax liability. Study Form each time you prepare your tax return to see how close you are to paying the AMT.
Evaluate how close your Tentative Minimum Tax was to your regular tax. For more in depth information on Form , see the Instructions. Check last year's return for any general business credits that are being carried forward. If there are some, they may be due to the Tentative Minimum Tax limit. If you exercise stock options during the year, see Incentive Stock Options above for guidance on how the timing of the subsequent sale of stock can affect your AMT liability.
All you need to know is yourself Answer simple questions about your life and TurboTax Free Edition will take care of the rest. The AMT is now affecting more and more middle income earners, despite Congress making multiple increases to the exemption amounts.
For those of you with a few years under your belt, think back to what was considered filthy rich in According to the IRS, what was rich in is the same amount as it is today. How many will be affected? If your income is above the AMT exemption levels see table below , there are a different set of rules and rates for figuring your taxes. Secondly, a host of tax benefits and deductions like state taxes that are available under the normal tax rules are not available if you fall under AMT rules.
In other words, far less deductions and a higher effective tax rate! I recommend you use some good tax software to help you or if your return is complicated, I suggest seeing an accountant. But if your taxes under the AMT rules and exemptions are higher, then you need to pay extra, making up the difference between the standard and AMT tax liability.
For a detailed breakdown and to calculate your specific AMT liability I suggest you use reputable tax software or visit the IRS website and complete their AMT tool or use the worksheet in Form or To make it painfully simple, the government will take the highest of the two amounts. Under the new tax plan and old plans as well , if you take the standard deduction can you also have an AMT? Timing capital gains. The AMT exemption an amount you can deduct in calculating AMT liability phases out based on income, so realizing capital gains could cause you to lose part or all of the exemption.
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