How To Avoid AMT: 5 Useful Pointers
Knowing how to avoid AMT can seem tricky and while there are many who already aware of the best ways to avoid AMT as it relates to their 401K or their other personal investments, there are other pointers that are far more subtle and seem to elude most of us. That's why it is important to further educate yourself on these matters and steer clear of the pitfalls.
Let's take a closer look at some of the lesser known tips and pointers, so that those of us who should not be subjected to these types of taxes (which are designed as a punitive measure for wealthier citizens who attempt to shirk their responsibilities) can successfully avoid AMT for the foreseeable future.
5 Helpful Tips To Assist You In Avoiding AMT
1. Rent Property Instead of Buying
If you own a home and pay a mortgage each month, you are far more likely to experience taxation difficulties. This is especially true for those who live in regions that have particularly high property taxes. Residents who choose to rent their home instead of owning it have the ability to duck AMT related taxes and if you are in a position where you are not reaping any benefits from home ownership, this is something that you are going to want to consider.
2. Live In A State Without Income Tax
Property taxes can often cause a resident to experience cumbersome AMT taxes and while these taxes cannot always be avoided, you can always choose to live in states that do not have income tax. If you live in a state, then these taxes are not weighted against you in any sort of AMT calculation. Those who do not not live in these states may want to consider moving to states that are more advantageous to their personal financial situation.
3. Proper Itemization of Deductions
When you take standard deductions, you are running afoul of the regulations that are related to AMT. You are not allowed to take these standard deductions under the current AMT regulations and if you want to avoid the AMT, you must itemize your deductions accordingly. By claiming a series of itemized deductions, you steer clear of AMT, even when these deductions are less than the typical standard.
4. Time Your Medical Expenses Properly
Under the current system of AMT taxation, expenses that are related to medical deductions can only take place when they account for at least 10 percent of your adjusted gross income. Meanwhile, the normal tax system offers citizens a 7.5 percent threshold. Those who have pending medical procedures may wish to delay them until a taxation period when they are facing the AMT for this reason. Should the expenses total more than 10 percent of your adjusted gross income, you could successfully deduct them.
5. Emancipate Dependents
Do you have college aged dependents who earn a sufficient income? If so, you should legally emancipate them for tax purposes, as you are able to deduct the money you would receive as a result of keeping them as a dependent and avoid reaching the AMT threshold.