San Jose Tax Attorneys – Originally conceived to combat taxpayers in the higher-income brackets who utilized legal tax shelters and tax preferences to avoid paying income tax, the AMT can be tricky and hit you when least expected.
The tax was supposed to inflict a “minimum” tax on those who were able to avoid the regular tax. However, years of inflation have pushed many middle-income taxpayers into the reach of the AMT. Although there is a long list of items that can trigger the AMT, for most individuals, the triggers include the following or a combination of the items listed below:
- Preference income from exercising stock options from an employer’s qualified plan, sometimes referred to as incentive stock options (ISOs);
- Having a large number of dependents;
- Having large itemized tax deductions;
- Having large miscellaneous itemized deductions;
- Large itemized deductions for state income or sales tax, real property tax and personal property tax;
- Large medical itemized tax deductions;
- Home equity debt interest deduction; and
- Interest income from private activity bonds.
In addition to those items listed above, watch out for transactions involving limited partnerships, depreciation and business tax credits only allowed against the regular tax. All of these can strongly impact your bottom line tax and raise a question of possible AMT.
Reference the following link for tips on Understanding Your Taxes.