Alternative Minimum Tax

Try this IRS tool IRS AMT Assistant.

AMT was designed to keep the rich from reducing their tax liability through investment choices and tax credits. For most folks, it doesn't apply as the more you make, the higher your regular tax bracket gets and you exceed the AMT tax rate of 26%. If you have certain types of income or take certain deductions or credits that are not allowed for AMT, your AMT income could be higher than your regular taxable income and you could have to pay AMT.

Good luck!

 

I did some quick calculations against my 2005 taxes to see what would happen had I been eligible for a $3100 hybrid tax credit. Based on my tax situation and other deductions/credits it turned out the hybrid credit would drop me below my AMT. In fact, it looked like I would not be able to claim most of the hybrid credit. Kind of disappointing.

So since I purchased a Prius last month I'm trying to decide how to change my tax situation to be able to claim the full $3100 on this year's taxes. I don't have much control over 95% of my income, and will still get deductions for mortgate interest and child tax credits. Seems the only difference I can make is to hold my charitable contributions until next year.

Still, I'm not sure what is the best thing to do to ensure the hybrid credit doesn't drop me into paying AMT.

 

I was basing that assumption off the interpretation given in this thread:

http://priuschat.com/index.php?showtopic=16116&hl=amt

Specifically,

"If you take possession before July 01, 2006 and your regular tax liability for 2006 is greater than your AMT by at least the full amount of the credit, estimated at $3150, you will qualify for the full credit.

If your regular tax liability is less than the the sum of your AMT plus the amount of the credit, you will only receive that portion of the credit which reduces your tax liability down to your AMT.
In simpler terms, you cannot reduce your tax liability below your AMT with this credit.
"

Makes it sounds like the portion of the credit you receive will be the difference between normal tax liability and AMT. Since deductions decrease tax liability it seemed like a good idea to limit how many I will claim.

I haven't yet looked into what my estimated AMT will be for the 2006 tax year, but I assume it will be at least what it was for 2005.

 

I don't think this is right.

A better question would be: how much of your income is sheltered in absolute dollars ?
Pay the C note to get decent accountant advice.