How to Reduce the AMT Tax
Alternative Minimum Tax (AMT) came about as way to stop some of the loopholes that wealthy Americans were using to pay fewer taxes. It uses a separate calculation to tax these individuals separately. Today, AMT is impacting a huge number of average taxpayers with increase inflation.
Things you will need to reduce your AMT taxes:
- IRS form 6251
- AMT instruction booklet
- Obtain form 6251 and fill the form out. The form will help you figure out if you are liable for the AMT tax. Normally, AMT is applicable if you made over $100,000. However, it is also applicable if your income is over $75,000 with high exemptions such as mortgage interest and other deductions. You also need to calculate AMT if you had any stock options in your business.
- Ask your employer for other business expense alternative arrangement instead of accepting deduction for unreimbursed business expenses. This way you do not have to claim an exemption for those expenses and reduce your AMT expense.
- Increase your qualified retirement amount. When you increase your retirement account, it decreases not only your taxable income but decrease your AMT taxes as well.
- Buy tax-exempt bonds and avoid investing in private activity bonds, which does not have any tax-exempt benefit under the AMT guidelines.
- Use every pre-tax program offered by your employer such as childcare and medical deductions or any other programs in place. Taking advantage of the pre-tax programs will reduce your taxable expense as well as the alternative minimum tax.
- Do not prepay any real estate taxes or fourth quarter taxes if you know that you owe the AMT tax. Pay the last quarter taxes in January instead of paying it in December.
- Increase your state exemptions if you normally receive a tax refund from your state as way to minimize your AMT liability.
- Make sure you understand the tax implications before making any changes in your capital gains investment. Talk to a tax accountant to help you with your tax issue.