Alternative Minimum Tax (AMT) Mitigation refers to strategies and actions taken to reduce or eliminate a taxpayer’s exposure to the Alternative Minimum Tax, which is a separate tax calculation designed to ensure that individuals and corporations pay at least a minimum amount of tax, regardless of deductions, credits, and other tax benefits they may claim under the regular tax system.
AMT Mitigation typically involves adjustments to income and deductions to minimize the likelihood of triggering AMT liability. Common techniques include:
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Timing of income recognition: Deferring income to future years when AMT may not apply.
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Adjusting deductions: Modifying the timing or type of deductions claimed. For instance, certain state and local taxes are not deductible under AMT rules.
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Utilizing tax credits: Taking advantage of AMT-specific credits that may reduce the overall tax liability.
For example, if a taxpayer has significant itemized deductions that are disallowed under the AMT, they might consider changing their investment strategy to optimize their taxable income and reduce the impact of AMT.
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