Re: AMT − Real Estate Taxes
Re: AMT − Real Estate Taxes
Source: http://newsgroups.derkeiler.com/Archive/Misc/misc.taxes/2007−03/msg00073.html
• From: "Shyster1040" • Date: Fri, 02 Mar 2007 11:06:43 −0500 ************* Is it possible for the effect of the AMT to be that it will not reduce tax liability − no matter how many $ in Real Estate Taxes are Paid/Declared? my case: If I play with my H&R Block Tax Cut and declare 20K in 1st & 2nd house Real Estate Taxes. My tax liability doesn't change at all. (And form 6251 exists with a nice hefty amount on it.) But, If I bump my mortgage interest by 20K my tax liab. drops by ~35cents for every dollar dollar. I've tried to follow the 6251 long form and I see the numbers and appears that there is a phase−out for the deduciton of real estate taxes but not, necessarily mortgage interest. Quel Merde Any numbercruncher out there concur? thank you for (be)rating me. ******************* Not only is it possible, it will definitely happen. For AMT purposes, no deduction is allowed for state and local real property taxes. See Code Sec. 56(b)(1)(A)(ii), which disallows a deduction for taxes described, inter alia, in Code Sec. 164(a)(1)("state, local, and foreign real property taxes"). Conversely, interest paid on the mortgage for your "principal residence" as defined in Sec. 121, and any "qualified dwelling" (i.e., house, apartment, condo, or mobile home) that is a qualified residence under Sec. 163(h)(4)(i.e., "principal residence" and one other residence elected by you that you own and that you use as a residence within the meaning of Sec. 280A(d)(1)). See, generally, Code Sec. 56(b)(1)(C)(i), (e). Thus, for AMT purposes, you can continue to deduct interest paid on the mortgage loan you used to acquire, construct, or substantially improve the house you live in and one other house, apartment, condo, or mobile home Re: AMT − Real Estate Taxes 1
Re: AMT − Real Estate Taxes that you elect to treat as a "qualified residence" and that you use for personal purposes for a number of days that exceeds the greater of 14 days or 10% of the number of days for which the residence is rented at a fair rental. As a result, no matter how much you pay in state or local real property taxes, your tentative AMT liability will not drop because none of those taxes are deductible, period (unless they were paid by a trade or business you carried on, in which case they are still deductible for AMT purposes; see Code Sec. 56(b)(1)(A)(flush language). However, the more you pay in interest, up to the applicable limits under Sec. 163(h)(which continue to apply for AMT purposes; see Code Sec. 56(b)(1)(C)), the more you can deduct from your alternative minimum taxable income, thereby reducing your tentative AMT liability. In terms of getting all of this from Form 6251, or the instructions thereto, the discussion above is not at all self−evident. The reason for this is that, instead of calculating your alternative minimum taxable income from step 1 again (i.e., starting with gross income), Form 6251 starts with your regular taxable income from Form 1040 and then makes adjustments to that amount to, ultimately, arrive at your alternative minimum taxable income. For example, the denial of the deduction for state and local real property taxes is accomplished via line 3 of 6251, which adds back to your regular taxable income the amount of any taxes you deducted on Sch. A of your Form 1040. Further, and a little more complicated, the adjustments made to the deduction for mortgage interest is accomplished via line 4 of Form 6251 and the worksheet on p. 2 of the instructions to Form 6251. Since you are allowed to deduct acquisition interest, but not other home equity interest, for AMT purposes, the computations you perform on that worksheet result in adding back to regular taxable income any deductions you took for home mortgage interest other than acquisition indebtedness. This is not a phase−out, as that term is typically used in the Code, but rather an adjustment to make sure that you only claim a deduction for acquisition interest. I hope that the foregoing gives you something of an explanation for what's going on with R/E taxes and mortgage interest under the AMT. .
Re: AMT − Real Estate Taxes
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