How can a taxpayer plan to avoid the possible wrath of the AMT taxes?
Tax professionals usually have a tough time attempting to devise a tax strategy to prevent the alternative minimum tax since the AMT often adjusts for various deductions and credits. Generally speaking, tax professionals usually recommend the following strategies as follows;
1. Review your state tax withholding.
Taxpayers are urged not to substantially overpay their State Income Taxes as this will keep your state tax deduction to a minimum, thereby keeping your AMT adjustments as small as possible.
2. Review the timing of the property taxes.
Taxpayers are urged not to prepay their 4th quarter property taxes prior to the end of the tax year as again this will keep your deduction for state and local taxes as low as possible.
3. Sell exercised incentive stock options.
Taxpayers are urged to sell their exercised incentive stock options in the same year they exercise them. When a taxpayer exercises & sells incentive stock options in the same year, they will be subject to the regular tax on the income but not the AMT. However, if the taxpayer exercises but not sell, the value of the exercised options because income for AMT purposes.