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Hmm.. I think I found the answer to my question.

State-taxes are not deductible under AMT system. I live in CA.

The state taxes are higher becuase of my high-AGI (which was the result of exercising Non-qual stock options, grants and other short-term and long-term capital gains)

I went back to another thread that I had started last year and there was a similar response. I am kicking myself at the moment. There was a suggestion in last year's thread to pay less state-taxes (less withholding) and pay the rest in April-2008. I might not have run into AMT if I had done exactly that! I might be paying for my laziness in the form of AMT. Hope this link works to find the old thread.

http://boards.fool.com/Message.asp?mid=25409293&bid=&sort=whole&terms=max401k&vstest=search_042607_linkdefault

Internet search on "AMT state taxes" - comes up with some articles that talk about state-taxes and about their being non-deductible under AMT.

Wish you all a satisfactory TAX-2008!
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