Editor's note: This is the transcript of Kiplinger Editorial Director Kevin McCormally's commentary on the March 26 broadcast of Nightly Business Report.
I got a question the other day from a Nightly Business Report viewer wondering if she'd come up with a clever way around the alternative minimum tax. She knew that one of the things that can trigger the AMT is a fat state income-tax deduction. Could she simply not claim all of her state income tax, if that would save her from being tossed into the notorious netherworld of the alternative minimum tax?
Believe it or not, the IRS recently took a taxpayer to court for trying to do just that -- avoid the AMT by not claiming all of her legitimate tax breaks. And, the IRS won. A federal court said the alternative minimum tax is figured the same way whether or not a taxpayer takes advantage of all of her deductions on her regular tax return.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But here's the most interesting thing about that case: Imposing the AMT did not add one dime to what the taxpayer owed the IRS. And that brings us to a critical issue for the viewer who asked the question ... and for all of you.
Remember this: You only pay the AMT when it's more than your regular income tax liability.
So, if you avoid the AMT by increasing your regular tax bill -- by skipping itemized deductions or exemptions for your kids, for example -- you're not doing yourself any favor. In fact, you're shooting yourself in the foot. The IRS is still going to collect the same amount ... or maybe more.
Now, in cases involving certain tax credits that are allowed under the regular rules but wiped out by the AMT, skipping a regular tax break to avoid the AMT might save some money. But don't think you can come out ahead by forfeiting itemized deductions.
See Kevin's previous tip.
-
Is Trump's Tax Plan Speeding Up the Looming Social Security Funding Crisis?Social Security Social Security's combined retirement funds are running out of cash, and its insolvency date is expected to occur in less than a decade.
-
How to Keep Your Work Friends After You RetireWork friendships can boost teamwork, lift your spirits, and make the job more fun. But when you retire, these friendships can fade. Here's a look at why that happens and what you can do about it.
-
New Trump Tax Bill: Five Changes Homeowners Need to Know NowTax Changes Trump’s new tax legislation is reshaping how tax breaks for homeowners work.
-
How the 2025 Child Tax Credit Rules Impact Single ParentsTax Credits New changes to family tax credits, like the Child Tax Credit, will impact the eligibility of some households.
-
How Your 2025 Wedding Could Save You Money on TaxesTax Breaks There are some wedding expenses that are tax-deductible, and you don’t want to miss out on savings.
-
Retirees Should Watch These Four Key Tax Changes in 2025Tax Changes This year brings key tax changes that could affect your retirement taxes and income.
-
Tariff Stimulus Checks Coming? New Proposal Seeks Tax Rebates for US WorkersTax Breaks A new GOP bill proposes to send $600 in tariff rebate checks to eligible taxpayers. Is there a catch?
-
Biggest Winners and Losers in Trump's New Tax PlanTax Law Trump’s mega tax overhaul, known as the ‘One Big Beautiful Bill,’ has distinct winners and losers. Which group do you fall into?
-
Five Ways Trump’s 2025 Tax Bill Could Boost Your Tax Refund (or Shrink It)Tax Refunds The tax code is changing again, and if you’re filing for 2025, Trump’s ‘big beautiful’ bill could mean a bigger refund, a smaller one or something in between next year. Here are five ways the new law could impact your bottom line.
-
New SALT Deduction Could Put Thousands Back in California Homeowners’ PocketsTax Breaks The federal state and local sales tax (SALT) deduction cap is higher this year, and could translate into bigger savings for Golden State homeowners.
