You might get some clarity from this post:
Message 15077261
As to when it "kicks in", figuring that is akin to witchcraft. To get a rough idea, think of the AMT as a flat-rate tax at 26%. Your taxable income for AMT purposes is the same as your normal income, but you can't deduct your state and local taxes, so add those back in if you deducted them from your regular 1040. Plus, "gains" from ISO option exercises must be added to the total, since the AMT considers this income even though the normal rules of the 1040 do not. From this, you can subtract a fixed exclusion amount (I think it's on the order of $35K but don't have the exact figure). You figure your tax using the 26% rate up to $175K or so, then 28% thereafter. If this tax is greater than your regular 1040 tax, the difference is the amount of AMT tax you must pay. (If it's less, and you paid AMT in previous years, you can use the negative AMT to reduce your tax in the current year up to the cumulative amount of rolled-over prior-year AMT.)
Net net, if you have a big ISO exercise, live in a high-tax state such as California, or have a large fraction of your income from low-rate sources (e.g. LT cap gains), or God forbid all of the above, you are likely to owe some AMT.
I would not discourage anyone from seeking professional help (I'm an MBA but not a CPA). I personally find that TurboTax is able to cut through the mess pretty effectively.
Happy Holidays! |
