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%)
Sponsored Content
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%)
Sponsored Content
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%)
Sponsored Content
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%)
Sponsored Content
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%.
Sponsored Content
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%)
Sponsored Content
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.
Sponsored Content
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.
Sponsored Content
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%)
Sponsored Content
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
Sponsored Content
-
8 Rules for Choosing the Right Financial AdviserNot all advisers are created equal. Here's how to find one qualified to manage your wealth and protect your legacy. From verifying credentials to trusting your gut, follow these rules to find a financial adviser.
-
A Hated TSA Rule Was Finally Phased OutAfter nearly 20 years, the TSA is ending its shoes-off policy. Travelers will still need a Real ID, and advanced screening remains in place. Here’s what to expect on your next flight.
-
Ten States with the Lowest Sales TaxSales Tax Living in one of the lowest sales tax states doesn't always mean you'll pay less.
-
10 Least Tax-Friendly States for Middle-Class FamiliesState Tax Here’s what living in one of the least tax-friendly states for middle-class families costs residents.
-
Low-Tax States for 'Middle-Class' FamiliesState Tax Here are the best states for families with middle incomes (due to low tax burdens).
-
15 States That Tax Military Retirement Pay (and Other States That Don't)retirement Taxes on military retirement pay vary from state-to-state. How generous is your state when it comes to helping retired veterans at tax time?
-
5 Tax Deadlines for October 17tax deadline Many taxpayers know that October 17 is the due date for filing an extended tax return, but there are other tax deadlines on this date.
-
Penalties for Filing Your Tax Return Latetax deadline Stiff penalties await those who didn't file their return (or pay any tax owed) by the tax filing deadline.
-
9 Tax Deadlines for April 18tax deadline Between requesting a tax extension, making IRA or HSA contributions, and meeting other tax deadlines, there's more to do on Tax Day than just filing your federal income tax return.
-
12 IRS Audit Red Flags for the Self-Employedtaxes If you are self-employed, minimize the odds of an IRS audit by avoiding these audit triggers.
