Alternative Minimum Tax Lawyers

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Who Has to Pay the Alternative Minimum Tax?

The AMT is essentially a way of making sure you do not get out of paying your fair share of taxes if you happen to be taking advantage of numerous tax loopholes (i.e., finding ways to avoid having to pay the amount you would normally have to without the loopholes).

There are a few things that are looked for on tax filing forms when deciding whether the AMT applies to a certain individual taxpayer. If the taxpayer has large capital gains that year, it is possible that the AMT will apply to him. Also, large amounts in deductions, such as large medical deductions or other itemized deductions, or exemptions may make you applicable for the AMT. If you pay a lot in local and state taxes you may also have to pay the AMT.

Are There Any Ways to Either Avoid or Reduce the AMT Payment?

For personal expenses, usually meaning the deductions you get for the number of dependents you are filing for, there is essentially nothing you can do unless one of your dependents leaves the house.

In terms of paying state and local taxes, you should remember that the AMT does not necessarily need to be paid every year. If you want deductions for large amounts paid in state and local taxes, try to see if you can arrange to pay for those taxes only in years where the AMT does not apply (i.e., pay off multiple years of state and local taxes all in one paying period). You may have to pay some kind of penalty fee for this, but it could still be less costly than paying the AMT.

Medical expenses are normally deducted for regular tax purposes if they comprise 7.5% of your adjusted gross income. However, they cannot be deducted under the AMT unless they make up 10% of your adjusted gross income. You may want to do similar with state and local taxes, and try to work out a way to pay medical bills so that you will be taxed for them only on years when the AMT does not apply.

You may notice a pattern forming here, that being you are going to have to plan out your AMT expenses ahead of time, and not just on April 1st when you've decided it is time to take a look at the old tax forms, but rather years in advance with some expenses. Of course you cannot plan all expenses, such as medical emergencies that happen to crop up, but do the best you can and definitely take advantage of regularity of some expenses by using them in your AMT planning.

Who Can I Consult if I Feel I Need Help with My AMT Planning?

The tax system itself is incredibly complex, much less figuring out when a certain kind of tax will apply and if it applies to your situation. For help you may want to consult a tax attorney. Your attorney can help you determine when and how much you should be paying, if you have any alternatives that might help reduce your costs.

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Last Modified: 11-28-2011 04:22 PM PST

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