Focus CPA Group, Inc. (562)281-1040

If your highest tax bracket under the Regular Tax is higher than your highest tax bracket

under the AMT, what does this mean? It means that by incrementally adding more income, you will be gradually working your way out of the AMT. You can test this and see for yourself the impact on your AMT by changing your ordinary income (not capital gains or qualifying dividends) by $10,000. For example, if you are in the top brackets of 35% for the Regular Tax and 28% for the AMT this additional income would increase your Regular Tax by $3,500 and your AMT by $2,800, which in theory reduces the AMT you pay by $700 ? the difference in the brackets times the income.

The actual difference will vary somewhat because of the several other limitations that are affected by any change in income. Specifically, the $10,000 additional income means that, for the Regular Tax, your personal exemptions and itemized deductions are further reduced, and for the AMT your allowable exemption also is reduced. The change that you see to your AMT liability is the $700 as affected by these other variables.