Last night I completed a quick mock 2010 tax return to see if the hubby and I should pay our property taxes this week to bump up our itemized deductions.
In addition to offering guidance on the end-of-year tax moves we should make, the draft tax numbers also provided the good news that we won't face the alternative minimum tax (AMT).
As a general rule, if your 2010 year-end projection indicates that you're likely to owe AMT, that situation will change your year-end tax strategy.
Basically, it won't be worth it for folks facing the AMT to pay some expenses that are deductible under the ordinary tax system but can't be claimed under the AMT.
The lost AMT deductions include:
- State and local income taxes,
- Real estate taxes and
- Miscellaneous itemized deductions, such as investment expenses and employee business expenses.
But, if like the hubby and me, you won't face the AMT, then run the numbers to see if prepaying some deductible expenses will help lower your 2010 tax bill.
AMT patch in place: A lot more folks will escape the AMT this year becasue the tax bill signed into law earlier this month included a patch that adjusted the parallel tax for inflation.
Under the new law, you won't have to worry about the AMT if your income falls under the exemption level. The table below, created by Grant Thornton's Washington National Tax Office, shows the AMT exemption amounts under the new law.
As you can see in the table, the tax law takes care of 2011's AMT earnings levels, too.
The two-year reference in this post's headline comes because the AMT adjustments had expired at the end of 2009, meaning Congress had to take care of the 2010 exemptions retroactively, along with those for the coming tax year.
But beyond that, it's back to Congress to either deal with the AMT once and for all or, more likely, to wait for lawmakers to come up with another short-term patch at the end of 2011.
- Merry Taxmas! House OKs tax bill
- IRS Commisioner chides Congress for its delay
in dealing with expired taxes
- AMT patch needed (yet again)
- 'Trust us on AMT,' Congress says
- AMT winners = 2007 taxpayers
AMT losers = the wieners in Washington
- The Advocate and the AMT
- AMT across the USA
- AMT moves to make -- or not make -- by Dec. 31
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