Why are more paying AMT?
Why are an increasing number of taxpayers, including more middle-income taxpayers, vulnerable to the AMT? For one thing, the exemption amount and the AMTI amounts aren’t indexed for inflation and haven’t been adjusted in several years. Taxpayers also are piling on more deductions in the wake of such tax acts as the 1997 Taxpayer Relief Act, creating a bigger spread between deductions and income. For example, personal tax credits such as the $500 child credit and higher education tuition credits are temporarily exempted from AMT, but only through the 2001 tax year. Now is the time to start to work with your tax advisor to see if you’re vulnerable and to take possible corrective actions. Planning is especially important because tax strategies used to reduce regular income taxes, such as deferring income and accelerating expenses in a given year, can have the opposite effect on AMT taxes. Also, plans to exercise stock options warrant a close look. It may be better to exercise before or af
