Q. I’ve just learned I’m in AMT this year. Is there anything I can do? Is there anything I can do to plan for next year?
— Taxed out
A. We’re sorry to hear you’re caught in Alternative Minimum Tax, or AMT.
For the uninitiated, AMT is an alternative tax system that was created to stop the wealthy from using too many deductions and loopholes, therefore avoiding paying tax at all.
But because legislators for years didn’t index AMT to inflation, many middle class taxpayers fell into the AMT trap.
To your question, if you’re in AMT for 2016, it’s really too late for any planning.
But there are steps you can take to prepare for your 2017 return.
“If you project you will be subject to AMT tax, then typical planning of accelerating deductions and deferral of income may not be a wise strategy,” said Gail Rosen, a Martinsville-based certified public accountant. “In addition, you need to plan over multiple years to see the effect of timing.”
She said if you think you will be in AMT for 2017, you may want to defer paying some AMT tax preference items.
“For instance, state taxes are a preference item for AMT,” she said. “If you wait to pay some of your real estate or income taxes until 2018, then you might get a benefit versus losing the benefit to AMT in 2017.”
It could also be beneficial to defer income, including capital gains, in AMT years, Rosen said.
Of course, the Trump administration has said it’s considering eliminating AMT, so this could be a short-term problem for you.
We recommend you work closely with a qualified tax preparer who knows your entire situation and can help you with strategies that will work for you.
Email your questions to moc.p1526955201leHye1526955201noMJN1526955201@ksA1526955201.