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Exorcise the alternative minimum tax demons

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Taxes are a necessary evil. On the federal level, they can take one of two forms: the regular income tax and the alternative minimum tax (AMT).

Strategy: Run the AMT numbers on your 2014 return. If the result is higher than your regular income tax, you’ll have to pay the AMT.

In the event you must pay the AMT this year, at least the highest AMT tax rate may be lower than your usual top tax rate on ordinary income.

Here’s the whole story: The AMT operates as a parallel tax system. After you’ve figured your regular taxable income at tax return time, you must compute the AMT. There are four basic steps.

1.  Add certain “tax preference and adjustment items” to your taxable income and make ­­other technical adjustments required by law.

2.  Subtract from this figure a special exemption amount based on your filing status.

On 2014 returns, the exemption amount is $52,800 for single filers and $82,100 for joint filers.

3.  Apply the ...(register to read more)

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