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Author: zeromax Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: AMT and Tax-free bonds Date: 5/24/2011 2:34 PM
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My wife and I are firmly in Alternative Minimum Tax. I don't really understand how this is calculated other than a lot of the breaks you get from the regular tax calculations are removed, and they see if you owe more at a flat 28% tax.

Of our bond portion in our portfolio in our taxable investment account a large percentage is in State and Federal Tax-Free bonds.

But do we lose the tax-free benefits being that we are in AMT? Also, do we lose the preferential tax rate on long term capital gains and dividends?

If so, what would a better tax-advantaged investment strategy be for this money?

Chris
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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69053 of 75383
Subject: Re: AMT and Tax-free bonds Date: 5/24/2011 2:59 PM
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zeromax: You may wish to re-post on the Tax Strategies Board; it is where most of the tax pros post most regularly.

And Kaye Thomas has a good summary at Fairmark - http://www.fairmark.com/amt/

Regards, JAFO

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Author: zeromax Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69054 of 75383
Subject: Re: AMT and Tax-free bonds Date: 5/24/2011 11:17 PM
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Many thanks, JAFO. I've re-posted this and I'll read the link you provided.

zeromax

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69055 of 75383
Subject: Re: AMT and Tax-free bonds Date: 5/25/2011 11:52 AM
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Your welcome.

Regards, JAFO

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Author: PSUEngineer Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69056 of 75383
Subject: Re: AMT and Tax-free bonds Date: 5/25/2011 3:22 PM
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You're welcome.

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69057 of 75383
Subject: Re: AMT and Tax-free bonds Date: 5/25/2011 10:12 PM
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Alternative tax generally comes about due to high deductions relative to income. In calculating your alternative tax, instead of several of the deductions you'd otherwise get for such expenses as property and state taxes, personal exemptions or, if applicable for you, the standard deduction, you get a standard AMT deduction and then a flat tax rate of 26% or 28%.

For most taxpayers, the only income 'preference' item, (income not subject to regular income tax but income for calculating alternative tax), is interest received on revenue, or income, or private activity bonds (these are different names for the same thing). The bonds you've mentioned, if issued by your state, are general obligation bonds, which are backed by the taxing authority of the goverment that issued them, so they will not be income for calculating your alternative minimum tax.

However, capital gains on these bonds will be includable as income for regular and alternative tax

BruceM

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