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Does anybody know if/when Congress will do a patch for the 2008 AMT exemption amount (which otherwise would drop to 45,000)? I believe they did it in december 07 for the 2007 exemption amount.

On a side-note, am I the only one "slightly" ticked off by these year-to-year, late in the year changes, which makes it gruesome to do tax planning when you are close to the AMT-threshold?

Thanks in advance

Maarten
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The "if" is yes, they'll pass another temporary fix. The "when" is anybody's guess. I think there was some hope to get it done before the election but since they've already left for a month, I wouldn't hold my breath.

And no, you're not the only one who is tired of these annual patches. Unfortunately the federal budget every year includes billions in future AMT revenue. Even then they can't get it close to balanced but future deficit projections would explode without AMT. Of course, it's just a game because everyone knows they have no intention of really collecting that revenue.
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After years of following them, I now refuse to even hazard guesses about what Congress might do. We simply have to do our tax planning conservatively and with an eye to change.

So if you're worried about making estimated tax payments, I'd do my best to base them on last year's income instead of this year's. You're working toward a known number that way, instead of the current year's unknown and unknowable number. Then to be conservative, set aside the additional potential taxes that might be due if Congress decides NOT to fix AMT this year.

Keep in mind that if you're on the cusp of AMT and depending on the whims of Congress to put you in or out, the actual dollars involved aren't going to be huge. Probably along the lines of a thousand or two one way or the other. So set that money aside in case it's needed and move on with life.

In my case, I now take the time I used to spend guessing the direction the wind is blowing in Congress and spend it on something productive, like guessing what my cat is going to do. I seem to have more luck at that. ;-)

--Peter
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Probably along the lines of a thousand or two one way or the other. So set that money aside in case it's needed and move on with life.


I agree. Although, 45k redemption versus 65k exemption is 20k difference. Multiplied with 26% is about 5k in taxes (unless I missed something because the whole dang AMT calculation is not that straightforward).

In our case, we are on the crisp from two-income to one-income. So the 5k extra may tip the scale and not knowing either way is, well, idiotic.

Maarten
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So if you're worried about making estimated tax payments, I'd do my best to base them on last year's income instead of this year's. You're working toward a known number that way, instead of the current year's unknown and unknowable number.

I absolutely agree. There's only 2 ways to figure installments: Either 100% (or 110%) of last year's tax, or compute each quarter on the Annualized Income Method. Guessing at the full year's tax is NOT a resonable option.

Then to be conservative, set aside the additional potential taxes that might be due if Congress decides NOT to fix AMT this year.

You don't need to figure in any potential (until next April) if you're using the last year's tax safe harbor.

ed
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Probably along the lines of a thousand or two one way or the other. So set that money aside in case it's needed and move on with life.


I agree. Although, 45k redemption versus 65k exemption is 20k difference. Multiplied with 26% is about 5k in taxes (unless I missed something because the whole dang AMT calculation is not that straightforward).

In our case, we are on the crisp from two-income to one-income. So the 5k extra may tip the scale and not knowing either way is, well, idiotic.


The difference may be 5K under the AMT rules, but that won't be your additional tax. Your addtional tax is the difference between your tax under AMT rules and your tax under ordinary rules. Only if your tax is exactly the same (using the 65K AMT exclusion) under regular and AMT rules, or you're already subject to AMT will your additional tax be 5K if the exemption isn't changed.

Ira
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You don't need to figure in any potential (until next April) if you're using the last year's tax safe harbor.

I was moving past the tax laws into personal finance there. My suggestion was to set some money aside in a personal savings account in case additional taxes become due next year because of the expiration of the AMT fixes.

--Peter
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The difference may be 5K under the AMT rules, but that won't be your additional tax. Your addtional tax is the difference between your tax under AMT rules and your tax under ordinary rules. Only if your tax is exactly the same (using the 65K AMT exclusion) under regular and AMT rules, or you're already subject to AMT will your additional tax be 5K if the exemption isn't changed.

You are correct, however, in our case, it is a couple of $100s off, give our take (not including on future raises, donations, investment gains/losses,...)

Maarten
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