In case you want to be one of those the liberals complain about....
Earn $1 Million and Pay No Tax
The Wall Street Journal Online
By Tom Herman
A Small but Growing Club
Of High-Income Filers Legally
Avoids IRS's Grasp, Despite the AMT
It is a very small club -- but one that has expanded rapidly in recent years. Its members: people earning $200,000 or more a year who manage, through perfectly legal means, to pay no federal income taxes.
The key to admission into this exclusive group is eluding not only the regular income tax but also the alternative minimum tax, or AMT, which was designed several decades ago to prevent just this sort of thing from happening. It is possible despite the fact that the AMT's reach has been expanding rapidly. This year, nearly four million people will owe additional taxes because of the AMT. Next year, if Congress does nothing to change the rules, more than 20 million people will owe more.
The Internal Revenue Service says that of the 2.6 million individual tax returns that reported income of $200,000 or more, there were 4,119 taxpayers who owed zero federal and foreign income taxes for 2001, the latest available year. That was up from 2,320 in 2000 and only 1,562 as recently as 1997.
Typically, there is no one explanation for achieving tax-free status. It usually is a combination of factors, such as large amounts of tax-exempt bond interest, medical bills, charitable contributions, casualty losses (such as from a fire or earthquake), business losses and investment losses.
The possibility of getting to zero highlights the disparate treatment of various deductions under the AMT. Under the AMT, you lose certain deductions, exclusions and other items that are available for regular tax purposes -- among them deductions for state and local taxes. That is why so many people in high-tax areas, such as New York and California, are complaining bitterly about the tax.
What Triggers the AMT?
Some deductions, exclusions and other items that millions of people claim under the regular tax system are treated differently under the alternative minimum tax, or AMT. Some items that aren't allowed under the AMT: • State and local income taxes and sales taxes
• Real estate and personal property taxes
• Deductions for personal exemptions
• Unreimbursed employee business expenses and certain other miscellaneous itemized deductions
Some items the AMT doesn't affect: • Most municipal bond interest income
• Casualty or theft losses
• Charitable contributions
• Gambling losses
Source: Ernst & Young
biz.yahoo.com |
