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Below we have provided a list of items that can trigger a liability under the Alternative Minimum
Tax. This list, although not complete, is based on those items that generally contribute to an
AMT liability. Our experience has shown that the chance of being subject to the Alternative
Minimum Tax increases with the number of these items that impact you.

EXEMPTIONS Although most people would not believe it, exemptions do contribute to AMT
liability. Exemptions that you claim for yourself, your spouse and other dependents are not
allowed when calculating Alternative Minimum Tax. Although it would be extraordinary for
exemptions to trigger AMT by themselves, exemptions combined with items listed below are
more likely to trigger an AMT liability.

STATE AND LOCAL TAXES For those taxpayers who itemize, there is a good chance that you
claim a deduction for state and local taxes including property and state income taxes. You
should be aware that these deductions are not allowed under AMT. Furthermore, if you live in a
place where state and local taxes are high, you are more likely to be subject to the Alternative
Minimum Tax.

INTEREST ON SECOND MORTGAGES AMT allows a deduction for interest on mortgage
borrowing used to buy, build or improve your home. However, if you borrowed against your
home for some other purpose, the interest deduction will not be allowed under the Alternative
Minimum Tax.

MEDICAL EXPENSES If you claim an itemized deduction for your medical expenses, part or all
of it will be disallowed when you calculate your Alternative Minimum Tax. Although the AMT
allows a medical expense deduction, it is extremely limited compared to the deduction under
regular income tax.

MISCELLANEOUS ITEMIZED DEDUCTIONS If you claim a large number of deductions in this
category, be aware that they will not be deductible under AMT. Under regular income tax rules,
itemized deductions that exceed 2% of your adjusted gross income generally are deductible, and
could include unreimbursed employee expenses, tax preparation fees and many investment

VARIOUS CREDITS The more credits you claim, the more likely you will have to pay
alternative minimum tax. Furthermore, many of the credits that are allowed when you calculate
your regular income tax will not be allowed when you calculate your AMT.

INCENTIVE STOCK OPTIONS In general, when you exercise an incentive stock option under the
regular income tax, you do not report anything. However, you will have to report income for
purposes of the AMT. Therefore, exercising a large incentive stock option is almost certain to
cause Alternative Minimum Tax liability.

                                                  ABC & Company
                                123 Street Address  (000) 000-0000  Fax (000) 000-0000
LONG-TERM CAPITAL GAINS Long-term capital gains receive the same preferential rate under
the AMT as they do under the regular income tax. In practice, however, it is possible to be stuck
with AMT liability because of a large capital gain. This is because a large capital gain reduces
or eliminates the AMT exemption amount that was designed to protect low-income taxpayers
from having to pay Alternative Minimum Tax. Over the last few years, we have seen individuals
on fixed incomes who receive large long-term capital gains from stock sales being forced to pay
Alternative Minimum Tax.

TAX-EXEMPT INTEREST Many taxpayers receive fixed incomes from various bonds. You
should be aware that interest that is exempt from the regular income tax may not be exempt from
the AMT. Bonds that are not exempt from AMT pay a slightly higher rate of interest to
compensate for the fact that they are not fully tax-exempt. Therefore, if you invest in bonds that
are not exempt, you are a candidate for AMT liability. Furthermore, many mutual funds that
provide exempt interest invest at least some of their money in bonds that are not exempt under
the AMT. Generally, this information is noted on your annual statement and will tell you how
much of the exempt interest dividend you receive during the year which is taxable under the
Alternative Minimum Tax.

TAX SHELTERS Although the Tax Reform Act of 1986 severely curtailed the ability to reduce
income tax through tax shelters, a number of these shelters remain available. For example, you
still can reduce certain tax liabilities through investments in certain types of partnerships or
limited liability company arrangements involving activities such as oil and gas drilling. You
should be aware, however, that the AMT provides reduced tax benefits for these activities.
Whenever you invest in a tax shelter, you should consider the Alternative Minimum Tax

As we indicated at the beginning of this checklist, you should be aware that these are not all of
the items that can trigger an Alternative Minimum Tax liability. For a greater discussion or to
analyze a specific situation, please feel free to contact our office.

                                                  ABC & Company
                                123 Street Address  (000) 000-0000  Fax (000) 000-0000

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