0% Capital Gain Rate and AMT

[tonia2021]

Is AMT going to kick in for our clients and offset the 2008 0% maxium capital gain rate?

[Bees Knees]

Technically no, but in reality yes.

AMT follows regular tax rules for the capital gain tax rates. However, because a capital gain increases overall income, a higher percentage of it will exceed the AMT exemption amounts and cause something else to be more likely to be subject to AMT.

[tonia2021]

I have a client that has minimal income ($15000) for a married couple. He is considering selling some land in 2008 for about $200000. If the capital gain rate is 0% on the land, is the AMT going to kick in and offset the 0% LTCG causing the taxpayer to pay tax on the land sale?
Thank you for a response.

[Roland Slugg]

Not 0% on all LTCG

The 0% rate on LTCG in the years 2008/2009/2010 only applies to such part of the gain that otherwise would have been taxed in the two lowest tax brackets ... i.e. 10% or 15% ... if it had been ordinary income. It takes the place of the 5% bracket that's been in effect for the past few years. Other LTCG income will still be taxed at 15%.

Remember that Congress can always change the rules, with the cooperation of the President, and we may have a new administration come January '09. The rates for 2008 should be safe, but what will happen in 2009 and beyond is anyone's guess.