Tax Law (Questions About Taxes)/Alternative Minimum Tax
My wife and I file jointly, take the standard deduction and have no other exemptions. In 2012, we will have $25000 in normal income as well as $3000 in qualified dividends. After taking the $11900 standard deduction, and 2 exemptions of
$3800, that leaves us with a tax bill of $550. (25000-11900-7600 = 5500 x 10% ). The $3000 of qualified dividends will be taxed at a 0% rate.
In 2012, with long term capital gains taxed at 0% for the 10 and 15% tax bands that leaves with an ability to take up to $65700 in long term gains that we can take and pay no tax on ( 74200 – 5500- 3000 = 65700.)
My question has to do the “ Alternative Minimum Tax”. Could we take the entire $65700 without having to deal with the AMT and if not how much could we take? Please note that our income consists only of that outlined in this question and that NONE of the things mentioned in Part 1 of form 6251 apply to us. Nor do we file form 2555 or 2555ez.
Impossible to tell at this point. If Congress does not patch the AMT, many taxpayers will face AMT. It is likely they will patch it, but no guarantees at this point. This is what is so frustrating about tax planning --- if the laws are not set FOR THE CURRENT YEAR, how the heck do we plan?
Running your situation simulated in my 2012 tax software, the AMT will not affect you even if not patched. Your tax liability will be approximately $1,078 as your taxable income does go slightly into the 25% bracket at $74,200. Calc is $25,000 regular income + $3,000 Qualified dividends + $65,7000 LTGC = $93,700 AGI less Std Ded $11,900 less 2 personal exemptions 7,600 = $74,200.
The 25% bracket begins with taxable income at $70,700.