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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 money
2) 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.
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