Do Muni bonds trigger AMT tax? How can I avoid paying so much AMt tax? George
Do Muni bonds trigger AMT tax?Some of them do. Assuming you're thinking of muni bond funds, that will mean part of it will be subject to AMT.How can I avoid paying so much AMT tax?1) Make less money2) Make more money and push yourself into a 35% tax bracket or such. You will pay more tax, but not via AMT.3) Don't do things to get deductions because they don't do you any good anyway (this doesn't mean don't do things like give to charity, it just means don't do things if the only reason you're doing thing is to get the deduction - because, you won't)4) Up your 401K contributions. This will reduce your overall tax, definitely, although what exactly will happen to the line that says 'AMT' may not be so easy to call.Otherwise, just be happy that AMT standard for Alternate *Minimum* Tax. It means that you are paying the minimum amount of tax that Uncle Sam says you can for your income level.
Do Muni bonds trigger AMT tax? How can I avoid paying so much AMt tax? Carefully read the prospectus. It is possible to buy muni's that are not subject to AMT. Converting taxable interest to non-taxable interest may not lower your AMT payments. Run the numbers before making any decisions. Debra
To make more money and get into the 33% or 35% bracket may not help. If the extra money you are making is from qualified dividends or long-term capital gains, supposedly taxed at 15%, you will still get taxed at the 28% AMT rate. If the extra income is from interest or short-term gains, or non-qualified dividends, you may pay less AMT, although there will still be more tax. I'm shifting income more into munis not subject to AMT, always individual bonds, not funds. There are some muni bond funds that have only a small % of bonds subject to AMT--IQI, IQM and IQT come to mind. Most of the muni funds carry a higher % of bonds subject to AMT because it increases their yields. Looks good on paper but you get taxed more than you might if you were buying individual bonds and specifically look for this fact. If you are using a full service broker, he will tell you, and if you are picking from an online listing it will tell you if a bond is subject to AMT. Best wishes, Chris
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