It's so hard being a parent these days. Between your son's violent video games and your little girl's insistence on wearing shirts that don't cover her belly, who can sleep at night?
To make matters worse, your tax situation is about as straightforward as quantum physics. Between that pesky alternative minimum tax, available kid credits and house deductions, most families are in a big ol' tax quandary.
So let's try to simplify things and offer some year-end tax tips to help ease the complexities.
AMT: A Time-Bomb
The Joint Committee on Taxation estimates that 3.8 million taxpayers will be hit with the AMT this tax season. And if the rules don't change, roughly 30 million tax households will be paying AMT by 2010. That's one in every three tax returns.
Currently, folks who have household earnings between $100,000 and $200,000, own a house in a state with high state taxes and have dependents are the biggest targets.
Try to protect yourself from this monster while you still can. If you think AMT is going to creep into your house this year, get professional help
now. You still have time to make some beneficial year-end adjustments. If you're not sure if you're going to fall victim to the AMT, here are a few things that should put you on guard.
If you took out a home-equity loan to pay for college, your kid's wedding or that long-awaited trip around the world, you can't deduct that interest under the AMT system. Loans that are used to make improvements on your home are just fine, but when the proceeds go to other miscellaneous life events, you're out of luck. So that could toss you into AMT territory.
Generating long-term capital gains can be a blessing and a curse, especially if you're cashing in a big chunk of shares. That additional income can throw you into AMT land pretty quickly, so consider the timing of your sales. And keep in mind that the state income tax you pay on that capital gain is not deductible under the AMT.
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Tracy Byrnes
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