Merry Easter! I'm trying to figure out whats going on with my Sched A itemized deductions and I'm somewhat confused. I do exceed the 128,950 AGI figure, so they are adjusted, but looking thru how the computations are done for that, it does appear its only an adjustment, not a cap.I'm using turbotax and playing around with my deduction figures, but it appears no matter what I do, any deductions over $25K or so don't reduce my lax liability one iota. If thats the case, I'm just trying to figure out why, and if there's any point in itemizing anything beyond once I hit that figure. I've been reading thru all the fool articles relating to itemized deductions this morning and it appears the tax I owe SHOULD still be reduced beyond that point, just that it would be adjusted somewhat. I have to make the assumption turbotax knows what it's doing (though I've printed out all the forms and have tried to follow along step by step) but I'm at a loss now. Any pointers would be greatly appreciated. Thanks.
Off the top of my head, it seems you are right. The various limits on itemized deductions are generally adjustments, not limits.However, I can think of at least two reasons that changing your deductions might not be helping you.Are you changing deductions deductions for items that are subject to a floor, such as medical expenses or miscellaneous deductions? Perhaps you have not crossed the floor and are not adding enough deductions to do so. For example, if your AGI is $150,000, only miscellaneous deductions over $3,000 (2% of $150,000) will help you. If you are increasing your miscellaneous deductions from $1000 to $2000 in this situation, nothing will change.Or, are you being hit with alternative minimum tax? Depending on your situation, changing certain deductions will not change the alternative minimum taxable income.You'd really have to poke around your return a bit to figure this out. But, it might be worth it.Mike Lynch
yes, i am being hit with AMT ($1629 unfortunately... oops) but the deductions im looking at are well over the 2% floor. AGI is around 133K. basically i have about $40,000 in misc sched A deductions (charity, home office, legal, unreimbursed employee expenses), but any amount over $23,210 doesnt change anything (i just played with the numbers to figure out where it stopped making a difference). If I drop below that figure, then the tax owed starts going up, it just appears once I reach that magic number, additional deductions don't appear to count for anything. Thanks for any ideas you might have, I thought I'd be able to do this myself and so far I haven't done badly, but I like to understand what it is that I'm doing and can't find the explanation for this one thing, and to me it seems like a big thing. If I can find it out here, great! If not, I'll just file for an extension and try and find a CPA who has some time available after this week.
yes, i am being hit with AMT ($1629 unfortunately... oops) but the deductions im looking at are well over the 2% floor. AGI is around 133K. basically i have about $40,000 in misc sched A deductions (charity, home office, legal, unreimbursed employee expenses), but any amount over $23,210 doesnt change anything (i just played with the numbers to figure out where it stopped making a difference). If I drop below that figure, then the tax owed starts going up, it just appears once I reach that magic number, additional deductions don't appear to count for anything. I suspect AMT is the culprit. Stop looking at that ridiculous "watch your refund grow" number and look at the return to see what happens when you change Schedule A amounts. I suspect you'll find that tax on line 40 goes down, but AMT on line 41 goes up an equal amount.Phil Marti
thanks, i realized that this afternoon. i just filed extensions for state and federal and am just going to turn this mess over to a professional after they have some time available :). maybe ill go back to doing them myself next year, this year was a horror story.
In looking at the alternative minimum tax (AMT), it requires that certain deductions be added back to taxable income, such as medical and dental deductions, taxes, and the other items in part 1 of form 6251 (adjustments and preferences). The calculation results in "alternative minimum taxable income," line 21 of form 6251. After dealing with exemptions, the "alternative minimum taxable income" is taxed at flat rates of 26% or 28% or as calculated in part IV. If the AMT is more than the tax computed in the regular method, then the higher tax is owed. Once the taxpayer gets into the AMT, then higher deductions do not reduce the taxes, since they are added back for the AMT calculation. I use Turbo Tax and it seems to handle the AMT with no problem, and I'd recommend the program. It suggests some ways to avoid AMT, primarily by shifting deductions into taxable years where they will not be erased by AMT. If anyone has had a bad experience with Turbo Tax and AMT, I'd like to hear about it.
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