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The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. For , the TCJA eliminates miscellaneous itemized deductions that were previously allowed for regular tax purposes but disallowed for AMT purposes.
So this risk factor is gone for now. So this risk factor is greatly diminished for newly acquired assets, but it continues to exist for older assets that are still being depreciated under the prior-law rules. For , the TCJA almost doubles standard deduction amounts. So the new law actually increases this risk factor.
And if you do still owe the AMT, you will probably owe less maybe a lot less. Even so, you might still benefit from taking steps to avoid or minimize any AMT hit under the new law. Here are some suggestions. If you are solidly in the AMT mode, the traditional regular-tax yearend strategy of prepaying state and local income and property taxes that are due early next year will not help you.
Those taxes are not deductible under the AMT rules. So pay them next year when you have a chance of not being in the AMT mode. Consider spreading out exercises of any in-the-money ISOs over several years. While the interest on municipal bonds is tax-free under the regular tax rules, interest on so-called private activity bonds is taxable under the AMT rules, which increases your exposure to the AMT.
A common example of a private activity bond is one used to finance a stadium for a professional sports team. You can then use the credit to reduce your regular tax liability in future years — but only to the point where the regular tax liability equals the AMT liability for that year.
You can carry an AMT credit forward for an unlimited number of years. In almost all of these scenarios, your bargain element will be applied towards AMT as a preference item.
Instead, the bargain element will be taxed as ordinary income. That is, the number of options you can exercise without incurring AMT. Exercise early. Check to see if your company allows early exercising early as in within 30 days of the grant.
If available, you have the option to exercise your shares within the first 30 days of the grant and file an 83 b election that would allow you to pay ordinary income taxes on your shares on the day of exercise. Exercise in January. Another way to minimize AMT impact is to exercise your shares you plan to hold early in the year. Run a multi-year projection. We recommend taking a long view on this decision. By calculating your AMT for the next few years, you can time your elections to optimize your tax rates, accelerating or delaying certain elections as needed.
You can calculate your AMT using Form , using a tax software, or with the help of a tax professional or financial advisor. Consult with a financial advisor. The best time is to seek the advice of a professional before you take any action.
Remember, not exercising your options, or missing the early exercise window by waiting, is also an action. Your situation is uniquely yours, so the only way to figure out the optimal option is to take a look at it closely.
Use this guide as a roadmap to navigate competing job offers so you can accurately evaluate the entire package and act accordingly. For investors who are looking for exposure to cryptocurrencies, an ETF might seem like the ideal solution. Please remember that past performance may not be indicative of future results. Moreover, you should not assume that any discussion or information contained on this blog serves as the receipt of, or as a substitute for, personalized investment advice from Brighton Jones LLC.
Brighton Jones LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. Please remember that you should never communicate any personal or account information through social media and it is important to familiarize yourself with their respective privacy and security policies.
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