2010 Alternative Minimum Tax or AMT impacts more than 30 million people in USA. The obvious question is how does Alternative minimum tax (AMT) deductions impact your tax returns. In case your income and deductions are the same like your previous year income status the chance of being subjected to this AMT is higher because the AMT always started its pre-reform level every tax season.
The Alternative Minimum tax system has its own rules for deductions and rates which is related to the
original tax system. However, individual taxpayer should be knowledgeable in their income status to take its full advantage. It can also offer 26% – 28% tax rate. Alternative Minimum tax (AMT) can only reduce tax liability you may have.
The Congressional Budget Office makes an estimation that 16.7% of taxpayers having Adjusted Gross
Income of $ 100,000 to $ 200,000 will pay AMT for this year. For the next coming year, the percentage
will up to 20% or even more. Apparently, if your gross income per year is $ 100,000 you are now a candidate for
Let us take a look at the areas where AMT affects deductions.
- Standard deductions – none
- Exemptions – none
- State, Local, and Property Tax Deduction – none
- Miscellaneous itemized deductions – none
- Mortgage Interest – none (if the funds was not used to pay, build or improve a house and purchase a car)
- Expenses for medical deductions and raised to 10% AGI instead of 7.5%
Also, here are year end tips to avoid wasting deductions for the coming tax season:
- Pre-paying of real estate taxes
- Pre-paying miscellaneous deductions items that is itemized
- Pre-paying expenses for medical
- Cancel income for the next tax season for funding the pension plan or IRS's, compensation
- plans, and health saving accounts.
- For house improvements instead of purchasing use HELOC.