28 Dec What does the tax plan mean for AMT?
Q. I’ve been in AMT in past years, and I’m hearing the tax plan will make it better – what’s changed and what can I do to get out of AMT?
A. The Alternative Minimum Tax, or AMT, is an alternate tax system that was created to make sure high earning taxpayers paid their fair share. It disallows common deductions, often resulting in a higher tax bill.
The problem with AMT is that over time, it was not indexed for inflation, and that left many middle-income families subject to the higher tax.
But the new tax plan changes the fate of many who fell into AMT because of the higher standard deduction.
“Given the $10,000 cap on taxes and the elimination of both miscellaneous deductions and personal exemptions, all of which were adjustments increasing the base for taxability under the AMT, it is less likely that you will be subject to it,” said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.
He said has compared the 2017 tax returns he’s done for clients with the new tax law, and he found AMT was dramatically reduced or nonexistent for most of them.
You should ask your tax preparer to run a projection of your 2018 taxes so you can plan effectively.
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