AMT:
SUPPORT REFORM THE AMT: http://www.reformamt.org/
Alternative minimum tax strikes fear in the hearts of many these days. If you are still in that high level income bracket (amid rampant industry paycuts) you are probably scratching your head trying to decide if you will be able to claim all of your deductions. There has been significant work done this year in Congress to repeal it. In the mean time, until you run your numbers it is often difficult to know if it will affect you or not. So using our service in that situation is your call. We do find that MOST people end up not subject to the AMT and still can utilize our report. Although we have no way of knowing your personal tax situation we have been advised that there are a few things you can do to minimize your exposure. They are included in the article below. - Aundrea Reel President, Pro-Diem, Inc.
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8 ways to escape the AMT tax sting
'Alternative minimum tax' is a mind-numbing term, but its provisions, as a growing number of taxpayers now know, can hit you like a ton of bricks. Here's now to minimize your exposure.
By Jeff Schnepper (Full article available at: http://moneycentral.msn.com/articles/tax/basics/6647.asp)
......As always, the answer is planning. If you fear you’re going to be subject to the AMT, your strategy is to accelerate income and defer deductions.
Under the AMT, you’re going to be taxed at a 26% or 28% rate. If you’re in a higher bracket under the regular tax computation, income acceleration will yield a smaller net tax under the AMT. Alternatively, deduction deferral to a year in which you’re in that higher bracket should give you a greater tax benefit.
To accelerate income, you can:
Take prepayments of salary or bonus.
Redeem Series EE U.S. Savings Bonds.
Redeem certificates of deposit.
Recognize short-term capital gains.
Convert tax-free bonds to higher yielding taxable bonds.
Withdraw money from your IRA or other retirement funds.
To defer deductions, you can:
Depreciate rather than deduct business furniture and equipment.
Hold off on the payment of non-AMT deductible items.
Let’s consider two more issues: property taxes and state and local income taxes. If you pay your property taxes into escrow, I would normally suggest making your Jan. 1 mortgage payment or your January estimated state income tax payment on Dec. 31 in order to get the deductions in the earlier year. But, if you’re subject to the AMT, you won’t get any tax benefit from either payment – the taxes are added back into your income as a preference. So, effective tax planning here might be to move you to bunch such taxes into a year where they’re allowable -- i.e., when you won’t be subject to the AMT. The same planning strategy applies to medical expenses, investment expenses and employee business expenses.>>>>
