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  • AMT changes

    I was hoping they would totally get rid of the AMT but at the last moment they kept it and signed it into law. Does anyone have more details on this?

  • #2
    Other than to regurgitate the bill to you, I cannot add a lot. This article may be helpful, and I especially like this calculator along with this help on manually estimating your AMT. Chances are, you are going to pay less in taxes next year.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Johanna,

      Thanks-as usual you are extra helpful. Well--I like you calculator--apparently it has me saving 20K on my taxes in 2018.

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      • #4
        Remember - only an estimate. Counting chickens and all that  
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Yes-agreed. I will have my DH review the articles as he does our taxes-they seem helpful.

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          • #6
            I think very few are going to be hit by AMT, particularly in the previous 200k-600k “doc wheelhouse” that previously hit 60%+

            Think of it like this. AMT is a flat tax system with rates of 26% & 28%. The exemption amount was only raised modestly (up to 109,400 MFJ), but the exemption phaseout threshold was pushed way up (1M MFJ).

            So if you subtract 109,400 from your taxable income and multiply by 28% (worst case, will actually be between 26-28%), then divide by your original taxable income, you will be unlikely to be at a higher effective rate than the regular tax system.

            Specifically the upper income ranges previously hit by AMT 300k-600k MFJ, seem freed now unless there are extraordinary circumstances.

            I’m no tax expert though and Johanna can correct me if this is turning out not to be the case.

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            • #7
              Johanna. Perhaps you could refresh us on your blog or this forum on what AMT items qualify for the carry forward minimum tax credit (ie deferral vs exclusion items) that those who have been paying AMT forever can now claim in 2018. Or those of us that have been bouncing in and out of AMT and have maybe forgot to claim
              MTC in past.

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              • #8
                Can someone give an example--say you make 0.5M married filing jointly---how much would the AMT be in 2017 and how much in 2018 all other things being equal?

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                • #9




                  Yes-agreed. I will have my DH review the articles as he does our taxes-they seem helpful.
                  Click to expand...


                  Designated hitter?  Guess you're not in the NL, then.

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                  • #10




                    Johanna. Perhaps you could refresh us on your blog or this forum on what AMT items qualify for the carry forward minimum tax credit (ie deferral vs exclusion items) that those who have been paying AMT forever can now claim in 2018. Or those of us that have been bouncing in and out of AMT and have maybe forgot to claim
                    MTC in past.
                    Click to expand...


                    You're kidding, right  ops: ? I wish I were as smart as you obviously think I am - CPAs are notorious for relying on software to compute AMT and you've already provided a good explanation.

                    Now that you mention it, however, it would be a good exercise for me to go back through the forms by hand like I had to do in the "good ole days" and refresh my memory. I'll try to do that and write up a blog post for the January newsletter. In the meantime, I'll see if Laura has any tips that I can pass along.
                    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11







                      Yes-agreed. I will have my DH review the articles as he does our taxes-they seem helpful.
                      Click to expand…


                      Designated hitter?  Guess you’re not in the NL, then.
                      Click to expand...


                      Often means "Dear Husband" but on this forum, I've been taking it to mean Doctor Husband - would like some clarification myself.
                      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                      • #12
                        meaning husband-dear on some days :-).

                        dc-dear child, dh-dear husband dw-dear wife, ds-dear son, dd-dear daughter.

                         

                        are we using the "D" for doctor on WCI?

                         

                         

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                        • #13
                          Current AMT:

                          • Adjustments: AMT used "adjusted income," so "above-the-line" adjustments such as retirement, HSA, and anything in lines 23-35 on Form 1040 reduces your adjusted income

                          • Deductions: itemized deductions don't tend to be eligible for AMT (schedule A) other than medical/dental and mortgage interest; see form 6251

                          • Exemption (amount subtracted from your adjusted income to figure the tax, form 6251 line 29): $84,500 MFJ, $54,300 single

                          • Phaseout threshold (adjusted income at which the exemption decreases by $0.25 per dollar): $160,900 MFJ, $120,700 single.  This means that the exemptions are gone by $498,900 MFJ and $337,900 single.

                          • Tax: 26% on non-exempt income below $187,800 and 28% above $187,800, so if above $187,800 multiply amount by 0.28 and subtract $3,756

                          • Example: Grossed $300,000, 401(k) $18,000, HSA $6,750, mortgage interest $10,000, other deductions (property tax, charitable giving, etc; not AMT eligible) $20,000, personal exemptions (not AMT eligible and phased out by 2% per $2,500 above $313,800) $16,200 assuming family of 4.

                            • AGI is 300k - 18k - 6750 = 275,250

                            • Usual taxable income = 275,250 - 10k - 20k - 16,200 = $229,050, 28% bracket, tax due: $29518 + 0.28(2290501 - 151901) = $51,119.72 = 17.04% effective

                            • AMT taxable income = 275,250 - 10k = 265,250, exemption (84,500 - 0.25[360,000 - 160,900]) = 58,412.50; tax due: 0.28(265,250 - 58,412.50) - 3756 = $56,958.50 = 18.99% effective

                            • Result: you pay AMT to the tune of $5,839 more




                          Future AMT:

                          • Adjustments: same

                          • Deductions: same afaik; might be wrong on that

                          • Exemption: $109,400 MFJ, $70,300 single

                          • Phaseout threshold: $1,000,000 MFJ, $500,000 single


                          So with that higher exemption and (mostly) due to the higher phaseout threshold, fewer people will hit AMT.  In the same scenario, since it's below the new phaseout, the AMT taxable income would become $153,120 and would now have $39,811.20 of tax due on it.  Hence, one wouldn't pay AMT in that scenario.  People would usually be out of AMT and back into the "usual" brackets because they'd have more income at the 39.6% marginal rate around $600,000; now people will hardly even break into AMT.

                          So the biggest key to avoiding AMT, or at least minimizing it, is to put as much as you can into adjustments or "above-the-line" deductions, mostly the 401(k) or similar pretax retirement account, and your HSA.  Mortgage interest also reduces AMT, though the new law caps interest at that which accrued on a principal of $750,000.

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                          • #14
                            Thanks, @dmfa - that is an awesome explanation.
                            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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