Discussion:AMT for 2008
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Revision as of 15:57, 28 October 2008 OR Taxman (Talk | contribs) (I believe the AM) Next diff → |
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| {{ForumReplyPost|UserID=Kevinh5|Date=28 October 2008|Text=Tara, you missed the Economic Stabilization Act a few weeks ago.}} | {{ForumReplyPost|UserID=Kevinh5|Date=28 October 2008|Text=Tara, you missed the Economic Stabilization Act a few weeks ago.}} | ||
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| + | {{ForumReplyPost|UserID=OR Taxman|Date=28 October 2008|Text=I believe the AMT patch for 2008 was part of the "Emergency Economic Stabilization Act of 2008," signed by the president on Oct. 3. See [http://tax.cchgroup.com/Legislation/2008-Emergency-Economic-Stabilization-Act.pdf] | ||
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| + | The AMT exemption amounts are $69,950 for MFJ/surviving spouse; $46,200 for single/HOH; $34,975 for MFS.}} | ||
Revision as of 15:57, 28 October 2008
Discussion Forum Index --> Advanced Tax Questions --> AMT for 2008
Discussion Forum Index --> Tax Questions --> AMT for 2008
| 5 September 2008 | |
| Each year congress increases the exemption amount for AMT. If they don't, the exemption reverts back to the exemption amount from an earlier year. I can't remember which year. Does anyone know if this legislation has been voted on for 2008 or has it not come up yet? It did not pass till late in December last year. This one always worries me. | |
| 5 September 2008 | |
| Believe that there are 6 bills now pending in Congress to adjust the exemption amount. | |
| 5 September 2008 | |
| It, along with the other extenders, is in a Bill that is not going any place right now. Probably another patch late in the year as usual. | |
| 5 September 2008 | |
| How would you advise a client that is sitting on the exercise of 1k ISO's? She has to exercise them all by 2009. Knowing how this exemption has to be voted on each year, would you risk waiting till 2009? | |
Death&Taxes (talk|edits) said: | 5 September 2008 |
| Did you mean 1M ISOs?
Find the delta between exercising at the AMT exclusion as it stands now, and as it stood in 2007 so you can see how much money you are talking about in AMT should she choose to exercise and not sell. Next step is to sell enough of the stock to take the preference low enough to avoid AMT, if possible. Depending on her situation [high tax state, e.g.], you may find this impossible and that AMT will hit no matter because of other items. In that case it becomes a crapshoot where you weigh time value of money by waiting against the prospects for the stock itself. A client I greatly respect for his management ability uses the maxim 'never leave anything on the table.' Of course, by waiting you could also be betting that with a new Congress and new personalities, there could be no AMT in 2009 but perhaps higher rates. | |
| 5 September 2008 | |
| I meant 1,000. I exercised the shares and got the bottom line and then sold some old iso's that qualified for cap gain and reduced the amt, but did not eliminate amt.
Should she exercise some this year and the balance in 2009? The considerations are: 1. exercise when stock is lowest. 2.Sell old iso's when stock is highest. 3. Bank on AMT exclusion being passed by congress for 2008 and possibly not for 2009. 4. Bank on AMT exclusion being passed by congress for both 2008 and 2009. 5. Bank on AMT being eliminated after election in 2009, but possibly higher taxes? Good Lord!! How do I advise this client. | |
| 5 September 2008 | |
| Regarding the ISOs, another consideration is that we are in a bear market so you have market risk and the individual company risk by exercising the ISOs and holding the stock. Also, if the stock price goes down in the future you won't get as much of a capital gain for regular tax purposes and therefore you won't get the negative AMT adjustment for the spread amount that was included in income when you exercised, it will be a carryover for AMT so it's not lost. You stated that you sold some old iso's which means that this client likely already has prior AMT credit carryover that they will be unable to use unless you can get them out of the AMT. By selling some stock acquired previously with ISOs and reducing the AMT you did not reduce the overall tax liability. You would have increased the overall tax liability if your gain for regular tax was greater than the negative adjustment for AMT. It's not possible to give advice without looking at all the facts. In order to receive a credit for prior minimum tax paid you need to get your client out of AMT, either with higer income so you're above the AMT or lower income. To what extent is your clients AMT exemption phased out? Would it help to bunch deductions such as property taxes and to a certain extent state taxes so that you could get your client out of AMT and use the credit in the non AMT year? If you can't get your client out of the AMT, it really doesn't make a lot of sense to exercise and hold the stock as you will be paying either 26 or 28% for the spread amount. It may make more sense to just exercise and sell in the same year in which case the spread would be ordinary income and you wouldn't have the market or company risk. Also, by increasing income substantially you may be able to increase income to the point that your client is above the AMT and thereby receiving the prior year minimum tax credit for the previous ISOs that were exercised. | |
ReadMyLips (talk|edits) said: | 5 September 2008 |
| I think you also need to factor in the AMT credit available in subsequent years; she could potentially get a credit for the entire AMT over a 5 year period. | |
| 28 October 2008 | |
| In March, the IRS announced that the AMT exemption for MFJ will be reduced to $45,000.
http://www.irs.gov/formspubs/article/0,,id=180801,00.html I can only hope that either a) I'm missing something, or b) there is more AMT change info that hasn't been announced yet that would counteract this dramatic decrease. I mean, in 2007, the AMT exemption for MFJ was $66,250! AMT is hard enough to explain/understand as it is, but with this reduced exemption, many people who've never had to pay AMT before will owe AMT. Does anyone know if there is any change pending that would lighten the AMT blow?? | |
| 28 October 2008 | |
| Tara, you missed the Economic Stabilization Act a few weeks ago. | |
| 28 October 2008 | |
| I believe the AMT patch for 2008 was part of the "Emergency Economic Stabilization Act of 2008," signed by the president on Oct. 3. See [1]
The AMT exemption amounts are $69,950 for MFJ/surviving spouse; $46,200 for single/HOH; $34,975 for MFS. | |
