Amt

[TAX]

Client - Individual - Res of NJ
Program used = Proseries Professional


Status = MFJ
AGI = 304,865
AMT = $5,940
Exemptions = 4 (two kids, TP, and spouse)

Exemption: $7,568 allowed (Vs. $13,200 ($3,300*4))
Sch A Line 28 Total = $48,916 allowed (Actual = $ 52,003)
Mortgage Interest = $20,930
Property Tax = $10,906
Total Tax = 61,862 Plus AMT of $5940 = $67802
With held = 63000


No AMT in 2005 or earlier.


Questions:

(1) Is there any way to reduce AMT?

(2) What is AMT credit and how much should client get?

(3) Which form to fill out for AMT credit? Is it 8801? IS there any carry forward I need to do for next year?

(4) IS there anything I need to watch out next year for AMT?

[Snaggletooth]

Reduce AMT

Sometimes things can be done, if the taxpayer is in control of those items which create the AMT.

The expensive tax state of NJ actually has little chance of reducing the taxes that become part of the AMT calculation. The "timing" issues, however, are redressable.

For example, I had a situation where there was lots of depreciable equipment and taxpayer was taking double-declining depreciation on all new assets. We hobbled around the AMT threshold for years, and finally in 2005 his AMT grew to $15000. We went back to his Sub S company and instead of 200% depreciation, we took a mixture of s. 179 and straight line, neither of which give rise to an accelerated item for AMT.

In 2005, we were able to reduce his AMT from $15K to $7K. By continuing this practice in 2006, we "reversed" the accelerated deduction to a "negative" $45K on that line item. Result was not only no AMT in 2006, but total recovery of the $7K on a 2006 8801.

But the taxpayer was in control of these things. Sometimes the tax preferences are the result of investing in those intangibles and he is not in control.