AMT and Equity Compensation
Alternative minimum tax, nonqualified stock options, incentive stock options and other forms of equity compensation.
AMT Due to LTCG
Posted by: mur44, November 30, 2015 12:34AM
I sold mutual fund shares in November 2015 and thus
will be affected by AMT. Your online information
on AMT is very informative. I have two questions:

AMT and Long-Term Capital Gain
By Kaye A. Thomas
Current as of December 24, 2014

Last paragraph:
Timing other items
Another way to plan for the AMT is to see if you can change the timing of other items that are affected by the tax. For example, if you make estimated payments of state income tax, you may try to schedule your payments so they donít fall in the same year as your large capital gain. In some cases you may come out ahead even if you incur a small penalty for being late with your state estimated payment.

How to determine if it is beneficial to delay estimated payment (into Jan 2016) in New Jersey?
(our income is SS and Pensions)

(2) what is the AMT rate in NJ?

Thanks a lot again.



Re: AMT Due to LTCG
Posted by: Kaye Thomas, November 30, 2015 02:13PM
As far as I can tell, New Jersey does not have a state AMT. The issue is whether you can reduce your overall tax by delaying payment regular New Jersey income tax until after the end of the year. The potential benefit comes from the fact that in a year you are paying AMT, you receive no tax benefit from claiming an itemized deduction for state income tax. You deduct state income tax in the year you pay it, so if you know you'll be paying federal AMT this year, you may get a better overall result if you pay state income tax after the end of the year, so that your federal deduction for state income tax paid falls in 2016, when you don't expect to be paying AMT and can benefit from the deduction.

Sometimes people have to incur a penalty for late payment of state estimated tax if they delay these payments until after the end of the year. However, we're already past the deadline for the third quarter estimated tax payment, and if your payments are up to date so far, the only question is whether you'll make your fourth quarter payment before or after the end of the year. Most states (maybe all?) follow the federal rule of requiring the fourth quarter payment by January 15, so there is no penalty for making this payment after the end of the year. In a non-AMT year, the usual advice is to make this payment before the end of the year so you can claim the deduction a year earlier. If you expect to pay AMT for 2015, though, you should make the payment after the end of the year but on or before January 15, so you'll have a larger itemized deduction in 2016.

Kaye Thomas
Fairmark.com

Re: AMT Due to LTCG
Posted by: mur44, December 1, 2015 03:53PM

Thanks for your explanation.

I tried to estimate 2015 income taxes using
Turbotax-2014 using two (2) scenarios (Paying NJ taxes in 2015 and Jan 2016). Below are results:

-------------NJ Taxes 2015------NJ Taxes2016

Item Ded------$24,000---------- $15,000

AMT Tax-------$ 6,100---------- $ 4,700

Fed Taxes-----$43,600---------- $45,000

Itemized Deductions helped reduce federal taxes by $1,400.

Am I doing something wrong? Thanks again.

Re: AMT Due to LTCG
Posted by: Kaye Thomas, December 2, 2015 01:50AM
It appears that you are receiving partial benefit from the itemized deduction in 2015. Try again where you pay $5,000 of the tax in 2015 and $4,000 in 2016.

Note that this strategy does not produce tax savings for 2015. The idea is to pay the same amount in 2015 while getting a larger deduction in 2016. The tax savings occur in 2016.

Kaye Thomas
Fairmark.com

Re: AMT Due to LTCG
Posted by: kaneohe, March 13, 2016 10:37PM
I'm probably way off base here but just in case.........

are you sure you're reading the TT results correctly?
The reason I ask is that if you add the AMT and federal taxes in the 2 columns above, you get exactly the same number which is quite curious......or maybe not.....

Is it possible that what you call the federal tax is really what might be called the regular (federal) tax and that there is another line below called total(federal) tax which adds the regular and AMT taxes.
That can happen sometimes where you have certain combinations of income.....you can use the std deduction or having increasing amounts of state tax and the regular tax and AMT will change but the total stays exactly the same.

Just wondering if that is your situation.



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