Money Matters
MommyLiberty5013
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Alternative Minimum Tax?
Do any of you have any experience with this in doing your taxes?
We're in TurboTax Premium and it appears that we cannot deduct our mortgage interest any longer due to this.
We're in TurboTax Premium and it appears that we cannot deduct our mortgage interest any longer due to this.
Re: Alternative Minimum Tax?
But more specifically, all the reading I have done online says that we SHOULD be able to deduct our mortgage interest even with the AMT being in affect for us. This might just be a glitch in TurboTax.
Anyway, curious if anybody has any experience with it.
Basically the government expects you to pay a certain amount of tax, so there is a tentantive tax under the AMT that gets calculated while you are doing your real tax calculations. If your real tax liability is lower than AMT, then the AMT will get triggered. The AMT adds many things back in.
I've had to do AMT calculations before, but I can't remember offhand if the mortgage interest deduction gets added back in. I think you can still take it for AMT, but the way you can use mortgage dollars under the AMT is restricted. That's just from memory though, you should check - it's been awhile since I've had to do those calculations.
If TurboTax has a glitch, try it in H&R Block. I have found that any given year one will be glitchier than the other. Last year I couldn't get TurboTax to generate the forms for our back-door Roths. This year H&R Block decided to generate two forms for my H, and I couldn't figure out how to make it delete one of the forms... but TurboTax has been flawless for us this year.
In years where I can get both TurboTax and HR Block to work until the very end, I just file the one with the bigger refund (or lower tax liability). They are always a little different from each other because they value in-kind donations differently.
If you guys tithe or have a lot of other charitable donations that will also affect it.
"Interest on second mortgages. The AMT allows a deduction for interest on mortgage borrowings used to buy, build or improve your home. If you borrowed against your home for some other purpose, the interest deduction isn’t allowed under the alternative minimum tax."
http://fairmark.com/general-taxation/alternative-minimum-tax/top-ten-things-cause-amt-liability/
I have to chuckle, though, that number of kids would affect this. It's not like many (if any) people have kids for the tax deductions! lol the cost of even one child over their lifetime, I'm sure, outweighs any tax liability one may have.
I will say though that the number of kids absolutely affects whether you get pushed into AMT territory or not. You get a $4,050 personal exemption per person. With 4 kids and 2 adults that amounts to $24,300, just through personal exemptions. If you make around $100K as a family, that's a full 1/4 of your income that gets zeroed out. I certainly wouldn't argue that people have kids for the tax breaks, but the fact remains that at certain income levels you get penalized for having additional kids through the AMT.
It's a lot like dual-income taxpayers getting hit with the "marriage penalty" because the tax laws are outdated and favor households with a single breadwinner.
All that being said, it's going to be the wild wild west this year with the Trump administration. I go to tax meetings every week to try to stay current and for the last three months all anybody has said is, "Well maybe Trump will do X." And then the next week it's "Actually, Trump will do Y." For now, I would withhold using last year's numbers and then just watch the news. We do think he's going to propose a comprehensive tax plan in the first 100 days, and if it gets passed that should be enough time to change withholdings mid-year if need be. Personally, I think that anything that gets passed will not go into effect until 2018 at the earliest, but I've been wrong before.