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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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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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Many thanks, JAFO. I've re-posted this and I'll read the link you provided.

zeromax
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Your welcome.

Regards, JAFO
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You're welcome.
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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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