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With some serious long term gains, I am expecting that I will be in the AMT territory for tax-2007 season and I am likely to have exhausted any AMT-exemption. I would appreciate suggestions from folks in similar situations to reduce AMT.

I don't own a home. The only deductions I make are
a) personal exemption in 1040
b) state/local income taxes in schedule-A (itemized deductions)
c) charitable contributions in schedule-A (itemized deductions)

I think I have very few things I could do in practice to minimize AMT.
1) Buy a home because the interest of primary-residence is fully AMT-deductible
2) pay less state-tax this year and owe more to state in April-2007.
3) increase charitable contributions this year
4) don't realize the income from stock sales that result in long-term gains. Transfer stocks to a LLC in exchange for a partnership. This may actually not exhaust the AMT-exemption
5) write to my representative and senator about abolishing AMT at least for tax-2007. :)

Do I have other things I could do to reduce AMT? I really don't mind paying taxes on my income, but would like to get as many legal deductions as I can. I read and hear about folks that pay zero taxes on $200K income and always wondered if there are things that IRS doesn't explicitly put it out there.

thanks,
max401k
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Max your 401K contributions

Decreasing your state withholding (without incuring underpayment penalties) and paying the balance in April 2008

Buying a home results in real estate taxes which aren't deductible for AMT. It is already April. By the time you closed on a home, it would probably be June. At best you might have 6 payments to deduct. Trying to "buy" a decrease in income tax by paying interest doesn't result in a net gain. AMT is not a good reason to buy a home.

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5) write to my representative and senator about abolishing AMT at least for tax-2007. :)

This is a reasonable choice. AMT is a tax law problem, and it will take a tax law change to alter it.

And you have another option - make more money. Get up over $800k or $900k and AMT won't be a problem for you. ;-)

--Peter
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With some serious long term gains, I am expecting that I will be in the AMT territory for tax-2007 season and I am likely to have exhausted any AMT-exemption. I would appreciate suggestions from folks in similar situations to reduce AMT.

I don't own a home. The only deductions I make are
a) personal exemption in 1040
b) state/local income taxes in schedule-A (itemized deductions)
c) charitable contributions in schedule-A (itemized deductions)


If this is it, unless b & c those are huge, I'm not sure why you expect to be in AMT territory.

You said you have large gains, but from what I've been told, AMT treats gains the same as regular taxes (i.e. 15%).

While there may be more you're not sharing, at the moment I'm not sure if you're really an AMT risk, or just misunderstanding something.
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If this is it, unless b & c those are huge, I'm not sure why you expect to be in AMT territory.

You said you have large gains, but from what I've been told, AMT treats gains the same as regular taxes (i.e. 15%).

While there may be more you're not sharing, at the moment I'm not sure if you're really an AMT risk, or just misunderstanding something.

______________________________________________
Actually, while capital gains are not an AMT preference or adjustment, people with large capital gains (or qualified dividends) usually DO pay AMT because their regular tax is low, based on their income.

And in that situation there's often not a lot you can do - or really want to do - about it.

Charitable contributions do lower your overall tax, AMT as well as regular. But if you're looking to lower the AMT number on your return, it will actually make it larger, because contributions lower the regular tax even more.

Bill

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You said you have large gains, but from what I've been told, AMT treats gains the same as regular taxes (i.e. 15%).

While there may be more you're not sharing, at the moment I'm not sure if you're really an AMT risk, or just misunderstanding something.


While it is true that the long-term capital gains will be taxed the same under regular and AMT rules, the large gains may make the other income subject to taxation at a higher rate under AMT than under the regular rules.

Ira
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