AMT is getting too close .... Help

[plattj1]

My question regards avoiding the AMT. It appears that this year I will bump into it unless I make a couple of changes. The simplest idea I can come up with is to make “catch-up” contributions to my 401 K since I am over 50 and thereby lower my net income. Will this lower figure apply to the AMT limits? I am close enough that this contribution would do it if it applies. If not I will have to restructure a bit to do some avoidance.

Also, I would like to take a long term position in the new dividend fund Vanguard is opening, but do not want to start down the same path with earnings that apply to the AMT. Any knowledge shared would be appreciated.

I posted this question on diehards, so if you frequent both please don't get upset. These are my two favorite financial boards.

John

 

[Martha]

My question regards avoiding the AMT. It appears that this year I will bump into it unless I make a couple of changes. The simplest idea I can come up with is to make “catch-up” contributions to my 401 K since I am over 50 and thereby lower my net income. Will this lower figure apply to the AMT limits? I am close enough that this contribution would do it if it applies. If not I will have to restructure a bit to do some avoidance.



John

Yes, the 401k contributions are not counted in your income for AMT purposes.

 

[mathjak107]

are you hitting the amt because of income or deductions?

 

[mathjak107]

last year we hit the amt tax because of large capital gains....this year we will trip it again because the large amounts of state and local taxes we paid would have left us owing little tax on our more normal usual income and so back on the amt we go.....it sucks this year too because i just had 6 dental implants done and the medical goes bye bye too under the amt

 

[pinkmali]

Have you run the numbers w/ different state witholding numbers (itemized deductions)? Last year I was able to, barely, avoid AMT by stopping our state withholdings. I did a tax projection in November. Unfortunately, we will probably fall into it this year unless our fearless leaders change the code Our state doesn't not enforce underpayment penalties so it worked to our favor. I may do the same this year and will decide towards the fall (our income varies b/c of husband's S corp income).
Hope this gives you an idea.
Robin

 

[plattj1]

Thanks for the help! I will change things a little and contribute more. That should do it for another year.