Year End Tax Planning -- AMT
Beware of the AMT when doing year-end tax planning
As year-end approaches, you may be trying to accelerate deductible expenses into 2014 to reduce, or at least defer, tax. But you must beware of the alternative minimum tax (AMT) — a separate tax system that limits some deductions and doesn’t permit others, such as:
State and local income tax deductions
Property tax deductions
Miscellaneous itemized deductions subject to the 2% of adjusted gross income floor, such as investment expenses and unreimbursed employee business expenses
Accelerating these expenses could trigger the AMT, because you must pay the AMT if your AMT liability exceeds your regular tax liability.
The American Taxpayer Relief Act of 2012 (ATRA) set higher AMT exemptions permanently, indexing them — as well as the AMT brackets — for inflation going forward. This will provide some AMT relief, but higher-income taxpayers could still be vulnerable.
We’d be happy to help you determine whether accelerating deductible expenses will reduce your 2013 tax bill — or could trigger the AMT.