Retirement & Financial Planning Report

As the alternative minimum tax (AMT) becomes an increasing concern, you’ll need to be vigilant to reduce its impact.


Look at last year’s tax return. You might not even realize that you paid the AMT, which is listed on the last page of your return. Check your latest return to see if that was the case. If you paid the AMT last year, chances are you will again this year, unless your finances are much different.


Reconsider prepayments. If you probably will be in an AMT situation, you should not prepay estimated state and local income taxes or property taxes in December because those deductions won’t do you any good. Similarly, it won’t pay to make your January home equity loan payment before the end of the year.


By the same reasoning, you shouldn’t prepay for expenses that might be miscellaneous itemized deductions, such as subscriptions to investment publications.


Avoid the standard deduction. The standard deduction is not allowed, for AMT purposes. Therefore, you may be better off itemizing your deductions, even if the standard deduction gives you a lower regular tax liability. This tactic may be especially beneficial if you have significant charitable or medical deductions, which can reduce your AMT as well as your regular tax bill.