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Where you live can trigger the AMT.
Ironically, living in a region with high state taxes -- including income, sales and property tax -- can increase your federal tax bill instead of reducing it. When moderate to wealthy taxpayers try to take these deductions on Form 1040, the amounts can be large enough to trigger the alternative minimum tax, which excludes these deductions.
Based on the most recent IRS data*, the Tax Foundation reports nearly half of all AMT filers, 44.2%, live in the five highest taxed states.
See which states offer best bets for avoiding or triggering the AMT and find out how yours ranks.
* AMT rankings are based on 2005 data. For statistical integrity 2005 data is referenced for all states, with more current data provide through notations.
WORST STATES TO AVOID AMT
No. 1 -- NEW JERSEY
- Percentage of AMT tax returns: 6.83%
- (National percentage: 3.01%)
- AMT tax liability (all state returns): $277
- Added tax liability per AMT return: $4,065
- Possible Factors for AMT Ranking
- State income tax: 5.525% (median tax bracket)
- State sales tax: 6%
- Avg. property tax & ranking: No. 1 -- $6,110
- Total state & local tax burden: 11.6% (U.S. avg. -- 11%)
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WORST STATES TO AVOID AMT
No. 2 -- NEW YORK
- Percentage of AMT tax returns: 6.00%
- (National percentage: 3.01%)
- AMT tax liability (all state returns): $322
- Added tax liability per AMT return: $5,370
- Possible Factors for AMT Ranking
- State income tax: 6.85%
- State sales tax: 4%
- Avg. property tax & ranking: No. 4 -- $4,800
- Total state & local tax burden: 13.8% (U.S. avg. -- 11%)
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WORST STATES TO AVOID AMT
No. 3 -- CONNECTICUT
- Percentage of AMT tax returns: 5.90%
- (National percentage: 3.01%)
- AMT tax liability (all state returns): $245
- Added tax liability per AMT return: $4,147
- Possible Factors for AMT Ranking
- State income tax: 5%
- State sales tax: 6%
- Avg. property tax & ranking: No. 2 -- $5,405
- Total state & local tax burden: 12.2% (U.S. avg. -- 11%)
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WORST STATES TO AVOID AMT
No. 4 -- WASHINGTON D.C.
- Percentage of AMT tax returns: 5.19%
- (National percentage: 3.01%)
- AMT tax liability (all state returns): $282
- Added tax liability per AMT return: $5,439
- Possible Factors for AMT Ranking
- Income tax rate: 8.7%
- State sales tax: 4%
- Avg. property tax & ranking: N/A -- $4,575
- Total state & local tax burden: 12.5% (U.S. avg. -- 11%)
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WORST STATES TO AVOID AMT
No. 5 -- MARYLAND
- Percentage of AMT tax returns: 5.02%
- (National percentage: 3.01%)
- AMT tax liability (all state returns): $190
- Added tax liability per AMT return: $3,790
- Possible Factors for AMT Ranking
- State income tax: 4.75%**
- State sales tax: 5%
- Avg. property tax & ranking: No. 26 -- $2,682
- Total state & local tax burden: 10.8% (U.S. avg. -- 11%)
** Figures not based on 2007 tax data. Maryland increased number of tax brackets for 2007 raising income tax up to 5.75%.
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BEST STATES TO AVOID AMT
No. 1 -- SOUTH DAKOTA
- Percentage of AMT tax returns: .87%
- (National percentage: 3.01%)
- AMT tax liability (all state returns): $30
- Added tax liability per AMT return: $3,474
- Possible Factors for AMT Ranking
- State income tax: None
- State sales tax: 4%
- Avg. property tax & ranking: No. 32 -- $2,353
- Total state & local tax burden: 8.9% (U.S. avg. -- 11%)
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BEST STATES TO AVOID AMT
No. 2-- MISSISSIPPI
- Percentage of AMT tax returns: .94%
- (National percentage: 3.01%)
- AMT tax liability (all state returns): $32
- Added tax liability per AMT return: $3,389
- Possible Factors for AMT Ranking**
- State income tax: 5%
- State sales tax: 7%
- Avg. property tax & ranking: No. 41 -- $1,815
- State & local tax burden: 10.5% (U.S. avg. -- 11%)
** Hurricane Katrina tax relief is a factor for these 2005 AMT rankings.
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BEST STATES TO AVOID AMT
No. 3 -- TENNESSEE
- Percentage of AMT tax returns: .96%
- (National percentage: 3.01%)
- AMT tax liability (all state returns): $49
- Added tax liability per AMT return: $4,051
- Possible Factors for AMT Ranking
- State income tax: None**
- State sales tax: 4%
- Avg. property tax & ranking: No. 42 -- $1,646
- Total state & local tax burden: 8.5% (U.S. avg. -- 11%)
**There is a 6% flat tax on dividend and interest income. Avg. income tax collect per person $24.
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BEST STATES TO AVOID AMT
No. 4 -- ALASKA
- Percentage of AMT tax returns: .97%%
- (National percentage: 3.01%)
- AMT tax liability (all state returns): $31
- Added tax liability per AMT return: $3,192
- Possible Factors for AMT Ranking
- State income tax: None
- State sales tax: 0%
- Avg. property tax & ranking: No. 11 -- $3,826
- Total state & local tax burden: 6.6% (U.S. avg. -- 11%)
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BEST STATES TO AVOID AMT
No. 5 -- ALABAMA
- Percentage of AMT tax returns: 1.05%%
- (National percentage: 3.01%)
- AMT tax liability (all state returns): $42
- Added tax liability per AMT return: $4,031
- Possible Factors for AMT Ranking
- State income tax: 5%
- State sales tax: 4%
- Avg. property tax & ranking: No. 50 -- $1,002
- Total state & local tax burden: 8.8% (U.S. avg. -- 11%)
How does your state rank? AMT Rankings for All States
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