With proper planning, you may be able to avoid the AMT (Alternative Minimum Tax) or at least reduce its impact—or perhaps take advantage of its lower maximum rate. But, planning for the AMT will be a challenge until Congress passes long-term relief.
Unlike the regular tax system, the AMT system isn’t regularly adjusted for inflation. Instead, Congress must legislate any adjustments. Typically, it has done so in the form of a “patch”—an increase in the AMT exemption.
Currently such a patch is in effect for 2011, but not for 2012.
So it’s critical to work with your tax advisor to determine whether:
You could be subject to the AMT this year. Consider accelerating income and short-term capital gains into this year, which may allow you to benefit from the lower maximum AMT rate. Also consider deferring expenses you can’t deduct for AMT purposes until next year—you may be able to preserve those deductions.
Additionally, if you defer expenses you can deduct for AMT purposes to next year, the deductions may become more valuable because of the higher maximum regular tax rate. Finally, carefully consider the tax consequences of exercising ISOs.
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Since 1999, Berrios & Associates, Inc. has been providing a distinctive mixture of leadership-knowledge, and customer service satisfying client needs in advisory, tax, and outsourcing. Serving a diverse client base from individuals and sole proprietors to private corporations with nationwide and international locations. In the domain of accounting firms, Berrios & Associates has engraved a distinctive business based on diverse solutions through the interpersonal relationship of corporate and personal tax, corporate back office support, and business growth advisory. The firm directs clients through their everyday operations to ensure they have the right business model in place to meet their business goals.