The recent tax bill passed by Congress and signed by the President is generally being referred to as the Tax Cuts and Jobs Act of 2017 and makes some sweeping changes in income tax laws. The intent of this post is simply to educate you on one broadly touted change in the tax law that did NOT come to pass, and may affect other things you do before midnight December 31.
NOTE: this is not intended as legal advice applicable to your specific situation. Please ASAP consult your tax advisor on this issue.
BEWARE: The individual alternative minimum tax (AMT) as it applies to individuals was not repealed.
If you are considering paying state and local property taxes, or income taxes, prior to December 31, 2017, you may be in a position of deducting them when you might not be able to deduct some or all of them in 2018 and beyond, because of the $10,000 on state and local taxes and because you might be better off not itemizing deductions and using the standard deduction.
HOWEVER, before proceeding, you need to determine your exposure to AMT. Some accountants will tell you that the first step in planning as an individual is not so much looking at your regular income tax exposure but looking at your alternative minimum tax exposure. AMT can produce a higher tax because of the differences in how income exclusions and certain deductions are treated.
Much was said about repealing the AMT for individuals. It was a prominent item of discussion. Many people believe it’s gone, but it’s not.
In other words, you have to compute your taxes two ways. One way under the regular tax system and another way under the AMT system. You pay the higher of the two resulting computations.
It’s easy to fall victim to the AMT. For example (this list is not exhaustive), if you have substantial long-term capital gains, or deduct significant amounts of miscellaneous itemized deductions, or pay large amounts of real estate taxes or other state and local income taxes, or exercise incentive stock options, you may fall into the trap.
The GOOD news however is that the new law does raise the exemption amount for AMT from $86,200 to $109,400 for a married couple filing jointly, and for a single taxpayer, the exemption increases from $55,400 up to $70,300.
I hope this helps.