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Originally posted by chuckw951
We have good incomes, pay state/local taxes and take the mortgage interest deduction. My understanding is that after a certain income level you loose those deductions and are subject to the AMT. But I don't understand how the AMT is applied and when.
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The AMT isn't simple, and I am not any tax professional, but my understanding of the tax is that you only have to start worrying about it when you have higher levels of "investment" income (like interest and dividend income and capital gains).
Whether or not the AMT applies to you depends upon ratios of your earned vs. "investment" income. Generally, for a couple married and filing jointly, you are going to need investment income/capital gains near the $300k range before the AMT becomes an issue.
The best thing to do, is to talk with a tax professional before selling any large asset or investment position that will likely result in your paying substantial capital gains taxes. Also be aware of the possible tax implications, and the effect on your income, involved in receiving/exercising any stock options you might receive from your employer. These two areas -- large asset sales and stock options -- are probably the most common way middle income earners are "surprised" by the alternative minimum tax.
Anyone more knowledgeable on the AMT, please feel free to correct any errors/omissions in my comments.