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YEAR-END PLANNING: WHAT'S YOUR AMT STATUS?
December 08, 2005
In our first piece on 2005 year-end tax planning I said you need to start with a 2005 tax projection. The first critical piece of knowledge this will produce is whether you are likely to pay alternative minimum tax in 2005. Tax planning for AMT is different.
If it looks like you have AMT this year, it changes your year-end tax planning. A lot of tax planning tricks don't work for AMT. For example, it usually doesn't make sense to prepay your state and local income and property taxes before year-end if you have 2005 AMT, as these items are not AMT-deductible.
If you are in AMT or close to it, you should continue your tax projections into 2006. By judiciously allocating your deductions between 2005 and 2006 - say, by prepaying some of your state and local taxes - you may be able to minimimize your taxes over a two-year period.
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