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How is AMT affecting you withdrawal rate?
Old 11-01-2014, 03:35 PM   #1
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How is AMT affecting you withdrawal rate?

Do you try to stay below the threshold? Those that are in the high state income tax and high property tax, what are your strategies?

Mp
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Old 11-01-2014, 03:48 PM   #2
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Are you talking about during the accumulation years or decumulation years.

I was fortunate (?) to miss AMT. One year I came close because of big bonuses AND big gains in the ESOP program. But I was a few thousand shy of the AMT threshold.

I can't imagine triggering AMT in retirement... but my budget is semi-frugal. (Not as frugal as some here- but more frugal than others.)

If I was still working, I would absolutely try to stay below the threshold. And I live in a high tax state.
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Old 11-01-2014, 04:38 PM   #3
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I am talking about during retirement with no earned income. It looks like state income tax, property tax, and mortgage interest lose their value to reduce Federal income tax when AMT applies. I was thinking about withdrawing $200,000 to $250,000 a year from my IRA account but found that all those normal deductions went away during AMT calculation, the only thing let was the exemption around $82,000 for a couple filing jointly.

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Old 11-01-2014, 07:37 PM   #4
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I'm mostly Roth converting, with no earned income. According to my calculations I should be avoiding AMT, the $250k AGI tax bumps, and anything outside the 25% IRS tax bracket. During RMD's it looks like I mostly just avoid a higher state tax bracket. Plenty of stuff to avoid.
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Old 11-01-2014, 07:48 PM   #5
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No AMT here.
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Old 11-01-2014, 11:13 PM   #6
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................ It looks like state income tax, property tax, and mortgage interest lose their value to reduce Federal income tax when AMT applies. ......................

Mp
Are you sure about the mortgage interest part? Are you talking about a simple loan on a 1st home? Googled articles offer seemingly conflicting info but it kind of sounded to me that some mortgage interest would not be affected. See F6251 and instructions also.
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Old 11-02-2014, 09:22 AM   #7
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Kaneohe, I think you are right, mortgage interest that you used to acquire or substantially improve the property can be deducted. I read too many articles and was a bit confused. AMTadvisor is an excellent site for this topic. I looked at form 6251 but have not tried to fill it out yet.


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Old 11-02-2014, 09:31 AM   #8
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Do you try to stay below the threshold? Those that are in the high state income tax and high property tax, what are your strategies?

Mp
I get tagged with AMT most years. I don't like it, I try to do the basic, simple stuff to keep my fed taxes as low as possible (with little success), but the important thing is to live our lives for max enjoyment, not tax avoidance. If that means an IRA withdrawal or stock trade which bumps us up in taxes (AMT or otherwise), so be it.

We don't say no to an activity such as travel, hobbies, etc., because doing it would bump us into AMT.
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Old 11-02-2014, 11:42 AM   #9
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Do you think that you will still be itemizing expenses (ie Schedule A) when you are retired?

After I stopped working, we now take the Standard Deduction every year (although I still pay charitable contributions, property taxes, a small bit of mortgage interest, and DW's significant state income tax every year)

FWIW, I have never encountered the AMT during working or non-working years.

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Old 11-02-2014, 01:54 PM   #10
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Kaneohe, I think you are right, mortgage interest that you used to acquire or substantially improve the property can be deducted. I read too many articles and was a bit confused. AMTadvisor is an excellent site for this topic. I looked at form 6251 but have not tried to fill it out yet.


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Yep. I have to divide my refi into original purchase, $100k home equity loan, and investment loan portions. AMT accepts original purchase and investment interest deductions but no additional home equity amounts. I use the $100k home equity amount in standard taxes for ease of filing, but if AMT is in play I have to include the $100k as investment expenses. Which it is, in a special account. It just requires that I show enough dividend income to cover the interest expense, which is annoying for a total return investor.
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Old 11-03-2014, 12:36 AM   #11
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Frankly, I'm not concerned for those of you with paying AMT in retirement.
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Old 11-03-2014, 05:42 AM   #12
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Do you think that you will still be itemizing expenses (ie Schedule A) when you are retired?

After I stopped working, we now take the Standard Deduction every year (although I still pay charitable contributions, property taxes, a small bit of mortgage interest, and DW's significant state income tax every year)
...
-gauss
My property tax alone exceeds the standard deduction, so I expect we'll always itemize.
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