The Irs recently released its 2011 version of the Form 6251 - Alternative Minimum Tax - Individuals. With year-end only a few months away, this serves as a timely reminder that anything stuck in the Amt needs to start reasoning about the ways they can sacrifice this burden. The most productive Amt planning strategies must be implemented by December 31 in order to have any impact on the current year's taxes. This narrative provides a normal overview of some of the foremost of these planning strategies.
Amt exemption amount
Tax Return Estimator 2012
Late last year Congress once again adjusted the Amt exemption whole for inflation - for 2011 it is ,450 for married couples filing a joint earnings tax return and ,450 for singles. While Congress hasn't even started reasoning about the "patch" that will be needed again on January 1, 2012, we can guess that at some point that will be taken care of.
Phaseout of the exception
For taxpayers whose incomes reach a safe bet level, the exemption is gently phased out. This phaseout is at the rate of of exemption lost for every of earnings above the threshold. For 2011 the threshold for marrieds filing jointly is 0,000, and for singles it is 2,500. If a couple's earnings is 0,000, for example, the exemption is reduced by ,500. If the couple's dutible earnings reaches 7,800, the exemption is zero.
Capital gains and dividends
While capital losses may be more typical these days due to the stock market's wild gyrations, it's foremost to note the Amt impact that results from capital gains as well as dividend income. These sources of earnings are taxed at the same 15% rate for both the Amt as well as the quarterly Tax, but there is a direct impact on an individual's Amt burden because of the exemption phaseout discussed above. For example, a ,000 capital gain by itself can supervene in 0 of Amt being paid (loss of ,500 of exemption times the marginal Amt rate of 28%).
Itemized deductions - state and local earnings taxes
The one item that affects the most majority of folks stuck in the Alternative Minimum Tax is the itemized deduction for state and local earnings taxes. While permissible for the quarterly Tax, this deduction is disallowed in its entirely for the Amt. For taxpayers who expect to be in the Amt for 2011, serious observation should be given to postponing cost of some quantum of these taxes into 2012. If the taxpayer is not in the Amt in 2012, real tax dollars can be saved that otherwise would have been "wasted" by not ding this basic planning.
Itemized deductions - asset taxes
The next biggest item in terms of Amt exposure is asset taxes which, similar to state and local earnings taxes, are not deductible in computing the Alternative Minimum Tax. Many taxpayers receive their asset tax bills in the fall, with a period of months before the taxes are indeed due. Just as with the state earnings tax planning mentioned above, taxpayers currently in the Amt might be better off pushing the cost of these asset taxes into 2012.
Other Amt items
There are quite a few other Amt items in expanding to those mentioned above. Some of these items are deductions from earnings that are allowed for quarterly Tax purposes but not allowed for the Amt, while others are safe bet types of earnings that are treated differently for the Alternative Minimum Tax. The Form 6251, ready on the Irs' web site, serves as a list of all of these items. Taking a look at last year's tax return serves as a great starting point to see which items are likely to affect the taxpayer again this year.
The value of planning
The average whole of Amt paid by each taxpayer caught in its tentacles is over ,000. Just a slight bit of time spent on basic tax planning can supervene in some vital amounts being saved!
Irs Releases 2011 Version of Form 6251 - Time to Start mental About Year-End Tax Planning
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