What Income is my AMT sweet spot?

[nmehta211]

very interesting.

for those of us with 1099 income, it may be easier to get total income in the sweet spot (ie doing additional IME exams, or turning down a speaking gig).

 

hard part is controlling wife's income and to try to adjust mine accordingly.

[Gasemup]

WCI, i think you missed my point.  Im not looking at the Fed Income Tax sweet spot.  Im looking for MY sweet spot.  If my wife and I work our standard hours we are near the end of AMT bump.  I just want to know when someone asks me to take their call (over salary), what is my effective tax rate is for that call.  Compared to most jobs/situations my income is easily flexible.  I also want to clearly know the pro/con of trad vs roth 401k for that year.  My title should be switched to "What is my AMT Sweet Spot?"

 

Gipper, the bump zone (35%) for a married couple should be 175k-475k

 

Boogiba, that seems odd.  Every place I have looked has the acceleration phase lasting about 100k.  Maybe you should recheck with another program.  Click below, see chart.

 

https://www.kitces.com/blog/evaluating-exposure-to-the-alternative-minimum-tax-and-strategies-to-reduce-the-amt-bite/

[Josh0731]

Apart from the AMT, I think this Kitces article on exemption phase-outs is really informative on this topic:

https://www.kitces.com/blog/how-the-personal-exemption-phaseout-pep-and-pease-limitation-are-really-just-1-income-surtaxes/

Scroll down towards the bottom and look at the large bar graphs and you can see the transition points for your marginal tax rate and the impact of exemption phase-outs.

[The White Coat Investor]

Gasemup wrote:

WCI, i think you missed my point.  Im not looking the the Fed Income Tax sweet spot Im looking for MY sweet spot.  If my wife and I work our standard hours we are near the end of AMT bump.  I just want to know when someone asks me to take their call (over salary), what is my effective tax rate is for that call.  Compared to most jobs/situations my income is easily flexible.  I also want to clearly know the pro/con of trad vs roth 401k for that year.  My title should be switch to “What is my AMT Sweet Spot?”

 

Gipper, the bump zone (35%) for a married couple should be 175k-475k

 

Boogiba, that seems odd.  Every place I have looked has the acceleration phase lasting about 100k.  Maybe you should recheck with another program.  Click below, see chart.

 

https://www.kitces.com/blog/evaluating-exposure-to-the-alternative-minimum-tax-and-strategies-to-reduce-the-amt-bite/

Click to expand...

That's relatively easy to do, especially if you use tax software. Go into your program/file for 2015, add $100 to your income and see how much your taxes go up by. That's your marginal tax rate. You can add $10,000 and do it again (add another $100 to that) or $50,000 and do it again. Very easy. Then youc an decide on your trad vs Roth 401(k). The AMT sweet spot is pretty narrow though as I recall, and it isn't even all that sweet. Fairly minor effect I think.

[Gasemup]

WCI, I already did that in a previous post (#17752) on this thread, see graph as attachment.

 

Income -> Fed+Medicare taxed at X%

490-508k -> 35%

510k -> 33%

511-610k -> 28%

612k -> 37.5%

>615k -> 41%

 

its a 7% drop in tax rate (35%->28%).  I would call that significant.  And as I mentioned it last for about a 100k in income.  Then you jump back into the traditional tax system (41% including medicare surcharge).