AMT "Wash"??

[Snaggletooth]

There have been threads discussing whether a taxpayer would be better off simply taking the standard deduction than itemizing, when AMT adds back all those itemized deductions to income for AMT purposes.

The best answer appears that the taxpayer IS indeed better off, and at the very worst, suffers only a dollar-for-dollar net swap with the AMT add-backs.

However, what happens if itemized deductions are limited by virtue of high income? I've got a guy with $119,000 in itemized deductions, $116,000 of which are TAXES. However, because he made a ton of money, his itemized deductions phased down to $90,000.

Is this STILL a dollar-for-dollar net swap even after the phaseout?

[WhiteOleander]

There was an article in the NATP journal last year about this issue. The t/p had taken the std deduction instead of employee expenses because it kept her out of AMT. She was audited for other reasons and this issue came up. It was decided that she could not opt to take the std deduction to avoid AMT. She lost in court.

[dtlee]

There was an article in the NATP journal last year about this issue. The t/p had taken the std deduction instead of employee expenses because it kept her out of AMT. She was audited for other reasons and this issue came up. It was decided that she could not opt to take the std deduction to avoid AMT. She lost in court.

Would you have a cite for this case?

[WhiteOleander]

Would you have a cite for this case?

No sorry. I just remember reading the article.

[dtlee]

I am sure I have the article somewhere. I was not aware of the court case though and will try to find it this summer (if I ever get there).

[joanmcq]

Well, I just prepared a return where the sales tax deduction was a better bet than the income tax even though the income tax was 35000 and the sales tax 2300 because the AMT made no difference on the federal return, but because of NY rules that allow the sales tax deduction but not the income tax deduction, they come out ahead on the state. Kind of the same thing, don't you think?