The more dependents you have and the more you pay in state and local income tax, the more likely it is that you will owe the AMT.
This deduction is claimed instead of (not in addition to) the state and local income tax deduction, and is most useful to residents of states, including Florida and Texas, that don't impose their own income taxes.
On the itemized size, the option to deduct state and local sales taxes as opposed to state and local income tax was restored, as was the inclusion of mortgage insurance premiums as part of deductible home mortgage interest.
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State and Local Taxes: The big ticket items here are state income tax and local property tax deductions.
There are many other potential problems associated with municipal bonds, including interest rate risk, and although they are federally tax-free, other state and local taxes may apply and interest income may be subject to the alternative minimum tax.
Yet, in nine of the 11 states, after adoption of the state income tax, total state and local tax revenues in the state as a percent of total state and local revenues in the U.S. declined as well, in some cases sharply.
Yet, in 9 of the 11 states, after adoption of the state income tax, total state and local tax revenues in the state as a percent of total state and local revenues in the U.S. declined as well, in some cases sharply.
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For example, the state of Washington has no income tax, but a minimum state and local sales tax of 7%.
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There's not much you can do to avoid the state and local tax problem other than move, but you may be able to time your income and state tax payments to reduce the AMT damage.
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Interest earned on state and local bonds that is exempt from income tax under Section 103 is excluded from the definition of net investment income for purposes of Section 1411.
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Savino says he has clients who are on the cusp of AMT who maximize the state and local deduction just until the AMT equals the regular income tax.
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And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%.
In New York City a high-income maker would have faced a combined state and local tax levy of 11.3%, easily one of the highest in the country.
Wait until January to pay some bills that aren't allowable federal tax deductions in the AMT, most notably state and local income taxes and property taxes.
The income tax deduction for muni bonds is supposed to help state and local governments to borrow at a much lower interest rate to finance large public investments.
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The federal tax code also allows taxpayers who itemize to deduct the cost of paying state and local income taxes.
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