What did I do to trigger AMT tax, and does it seem to you that I am paying too much tax?

Question

My AGI = 236K, and taxable income = 137.6K. My total fed tax = 47.4K, which is 34.5% of my Taxable income. My Schedule A is 86K, with nearly all of that being state taxes paid in 2006 for a big capital gain I realized in 2005.
It seems like I am paying way too much tax, but is it because of the deduction of state tax payment?

Answer 1

The itemized deductions are probably what did you in for AMT. Sorry, but your situation is exactly what the AMT was designed for, a high income taken down a lot when calculating taxable income.

You could recalculate it without itemizing, but I doubt that would be any better. Or itemize, but take the sales tax deduction from your state table rather than state and local income taxes - that probably won't help either but give it a try.

That must have been some whopping capital gain, to pay that much state tax on it! Congrats on that, anyway.

Answer 2

I'm guessing you have too much passive income, that's usually what triggers it - and yes, I personally think that yours is a really big chunk - you might want to get some loss leaders like a farm to help lessen the tax burden - Section 179 can be your friend.

Answer 3

your effective tax rate is only 20 percent (236000/47400) you don't say what your mortgage interest and real estate tax deductions total. you also do not mention your 2005 federal tax liability (curious why)

Answer 4

My friend has that same problem and yes, it's that high state taxes paid. The rest of her return is very typical, no foreign tax credits, childcare etc. Just high state taxes paid and it gets her. So unfair.

Answer 5

You probably just breached the 'minimum' that is all it takes. And yeah, if you are paying more than 15% in federal, like all the true tax payers are, yeah, we are all getting hosed!