Alternative Minimum Tax (AMT) What is it? And How Does it Affect You?

AMT is the most misunderstood item in tax law, yet it truly is quite simple. You calculate your income tax liability using the standard rules we all know and love, then calculate it again using the AMT rules that most people don't understand. Whichever calculation shows you owe more is the one that gets used! Now, isn't that simple??? The government wouldn't have it any other way. . . . .

Rather than explain how AMT is calculated (it will bore you to death), I would rather explain what can cause you to fall into this category as ultimately, you will pay MORE in taxes under AMT than you would otherwise. However, if you do fall into AMT, there are some planning alternatives to take advantage of the situation and ultimately save you some hard earned money!

How do I know if I am going to be stuck with AMT??? The answer is somewhat complicated, but here are a couple items that can potentially cause AMT to become a possibility.

1. If you had significant medical expenses this year
2. You made large payments in state income and property taxes
3. Mortgage interest paid on a Home Equity Line of Credit
4. Significant Business Expenses

While every situation is unique, we strongly recommend you consult us about your individual tax situation as these four items are just the major factors that can cause AMT to take effect. Every individual's tax situation is unique.

So a few of these items pertain to me and I might be subject to AMT????. . . . . what do I do??

While you may have to pay more in taxes under AMT, there are some strategies to make lemonade out of the situation, so don't be afraid to ask us for help!

We would be pleased to further explain AMT and discuss ways to help you either avoid it or plan to use it. As always, please call (949-683-8111) or email us at info@southcountycpa.com if you have any questions. We are here to help.