Tax Time! Is it true that if you are subject to AMT, you cannot decuct ANY of your property tax from income?

Question

Let's say for example I make $500,000 and have a $20,000 property tax bill. According to what I've read, if you make over $100,000 and have prop tax deductions you are subject to AMT. But, does that mean I cannot lower my taxable income to $480,000 and save about $8,500 in taxes?

Can I have my domestic partner, or anybody in the house pay the prop tax if s/he makes under $100,000 so they can get the deduction? Thnx.

Answer 1

Only the person who owns the property and pays the tax can claim the tax bill. So if your DP doesn't own any of it, the deduction won't apply to them.

Have you looked at the AMT form? Essentially, the form starts with your income after itemized deductions and starts adding back income. The $20K in property tax is added back.

If the *only* deduction you got was property tax, and if you got to take it all, then:

$480,000 in total income is about $147000 in regular tax.
$500K of income is $136,500 in total taxes under AMT.
Since the regular tax is higher, you would still pay $147,000.

Watch the news--one of the planned fixes for AMT is to put a 4% surcharge on incomes over, say, $250K. That alone would put your AMT tax higher.

Answer 2

If you are subject to AMT your deductions in effect end up limited and you lose some or all of the benefit of them.

If the other person's name is on the deed, they could pay the property tax and deduct it. If their name isn't on the deed, they couldn't deduct it even if they paid it, since they wouldn't be legally obligated to pay it.