Just did our taxes and we owe an extra $2K in AMT. Our ONLY itemized deductions are our State and City (NYC) taxes. AMT was developed to make sure that the "rich" pay enough in taxes. Does it make sense that I have to pay more in federal tax because I paid too much in city and state tax or did I make. show more Just did our taxes and we owe an extra $2K in AMT. Our ONLY itemized deductions are our State and City (NYC) taxes.
It's a long sad story how Congress duped the American people. Everybody thought in 1969 that the rich would BEGIN to pay taxes. That's a sick joke as the rich DO pay the vast majority of tax dollars simply because they have more income and more money with which to be taxed.
You pay a lot of tax in New York and have local taxes taken in NYC on top of it. Those are not allowed to be deducted against your potential alternative minimum tax liability. This is why people in "low" income tax states cannot understand all this concern about alternative minimum tax. Also, you have very high real estate taxes in New York.
Realistically, the only thing you can do is start a business. In many situations, you are in no danger of owing alternative minimum tax by owning a corporation for the first three years you are in business. If you earn a lot of money, you pay 35% and are done with it. The 26% and 28% AMT brackets become academic.
If you do not have business losses, there is very little you can do, and even that little bit requires diligence and planning. Is there an advantage of paying the property tax full for the current tax year or do installments?
The answer to this question actually is: Normally, in installments, particularly if you own a small business. But, have you had to pay alternative minimum in a previous tax year or, did you make a fairly large income last year [2007>? I say that because, if you plan, you can blunt the impact of alternative minimum tax. But it takes planning. An example of what I mean is: if you going to be hit by alternative minimum tax and you anticipate making less money
If this doesn't apply, usually you pay semi-annually. You have to be careful as you do not want to pay a 5% or 10% penalty, depending upon the municipality. This applies whether you are talking about personal property tax, business property tax or real estate tax. The terms get mixed up, even by the banks.
If the taxpayer has a business, he is not subject to the
2% of AGI limitation. This deduction is largely unused. So if a taxpayer has a business, he has a vast resource of potential deductions. The most affordable one, so long as he has the means to start a business and keep the business afloat, would be to switch his health insurance to the policyholder being the business name. Then the business owner pays the premiums out of his business. It's called the Self-Employed Health Insurance Deduction. You cannot deduct it on the Schedule C. There are a few restrictions. The business owner uses the 1040. It's Line 29. The self-employed health insurance deduction is not subject to the 7.5% AGI subtraction; 10% when figuring AMT liability. With the high and rising cost of health insurance, this is the only feasible way to pay the premiums. In 2004, the premiums became 100% deductible on the Schedule C. Only 10 or 12 years ago, the premiums were only 40% deductible. This is the only way to be able to afford family health insurance in America, but the deduction is unused, because it is being overlooked.
Form a corporation: Alternative minimum tax
plan ahead! Remember, a corporation is not liable for alternative minimum tax for the first three years in business so long as the corporation makes less than 5,000,000. A corporation is exempt from AMT the first calendar year or approved fiscal year that it has been in existence. A corporation is exempt from AMT this year if it has been exempt from AMT for all prior years since 1997 AND its average annual gross receipts for the three year tax period (or portion thereof during which the corporation was in existence) ending before its tax year beginning in 2007 did not exceed 7.5 million ( five million if the corporation has only one prior year). Then you should read the definitions of "gross receipts".
See if your medical deductions exceed the 7.5% floor that you have to subtract. That means you must subtract 7.5% of your adjusted gross income from the total medical deduction
In many cases you can deduct 7200 <600.MO premiums work out to 7200/year>, or even more, that could not otherwise be deducted at all. If your business shows a decent income, you can knock that income down and save doubly on your taxes with the self-employed health insurance deduction!
Form a corporation,sole proprietorship or join a partnership. Have an enrolled agent show you all the business related deductions you can take.