So, no matter how you twist and turn, you may not be able to dodge a tax hit from this lethal “stealth tax.”
Our advice: Make the best of a bad situation. It’s possible to reduce your AMT fallout by prepaying certain expenses or postponing income. Or, you might use a reverse strategy (outlined at the end of this article) to beat the system. The worst thing is to do nothing now and take your lumps at tax-return time.
How the AMT works: Each year, you’re required to run parallel calculations of your regular income-tax liability and your AMT liability. In effect, you pay whichever tax is higher.
Here are the five basic steps for computing your AMT liability:
- Figure your taxable income for regular tax purposes.
- Add designated “tax preference items” to this figure, and make the othe...(register to read more)
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