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Which Investments Can Trigger the AMT?

AMT Exemption

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Q  In a recent issue, you mentioned that lots of capital gains and depreciation deductions on investment real estate could put you at risk for the Alternative Minimum Tax (AMT) (SBTS, June 2007). Does this apply directly to capital gains and all real estate? H.T.P., via e-mail

A  Not exactly. The main problem relating to capital gains is that the alternative minimum tax (AMT) exemption phases out when your income exceeds a certain level. Thus a large amount of capital gain can reduce or eliminate the AMT exemption. Also, one adjustment for the AMT calculation is accelerated depreciation claimed for business equipment and investment real estate. However, an adjustment is not required for real estate placed in service after 1999.

Tip: The combination of these and other elements may trigger AMT consequences for individual taxpayers. If you estimate that you will have an AMT liability for 2007, you might postpone certain investment transactions.

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