- 1). Itemize your deductions, even if they are less than the standard deduction. Under the AMT tax system, you cannot take the standard deduction. However, you can take the itemized deductions.
- 2). Reduce your salary by taking advantage of any pre-tax medical or child care deductions offered by your employer. This will help reduce your taxable income and AMT.
- 3). Contribute the maximum allowable amount to a qualifying retirement plan. This will help reduce your taxable income and AMT.
- 4). Take the home office deduction if you are eligible to do so. Your home office must be used regularly and exclusively for your business. A home office deduction will allow you to deduct a part of your home real estate tax on a Schedule C, which transfers to the AMT system. Typically, your real estate taxes cannot be deducted under the AMT. Taxes deducted on Schedules E or F are also allowable under the AMT.
- 5). Invest in tax-exempt bonds instead of private activity bonds, which lose their tax-exempt status under the AMT.
- 6). Draw smaller gains if you suspect you will be subject to the AMT. A large capital gain may reduce the AMT exemption amount ($70,950 if married filing jointly, $46,700 if single). Without this, your AMT could shoot through the roof.
- 7). Take care with incentive stock options. Exercising a stock option will likely make you subject to the AMT.
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