Changes to AMT?

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date Changes to AMT? Samson 12-21-2007  Re: Changes to AMT? Mark Freeland 12-21-2007  Re: Changes to AMT? Mark Freeland 12-21-2007  Re: Changes to AMT? Tad Borek 12-21-2007
Posted by Samson on December 21, 2007, 6:54 am I hear vague reports of changes to AMT. Does anybody know the specifics that congress has proposed? Will this effect people who are exercising company stock options? And should this be well understood before the end of 2007, a week from now, so that it can be acted on? Samson Posted by Mark Freeland on December 21, 2007, 11:36 am The IRS Wednesday promised updated forms within 72 hours on their website. That gives people enough time to react (5 trading days). Or, you can read the law now (apparently still waiting for Bush to sign): http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.03996: Here's the text: http://thomas.loc.gov/cgi-bin/query/D?c110:6:./temp/~c1100LSWUs:: Very short, and accurately reported by the press - it increases the exemption amount (the amount you subtract from your AMT income before taking 26%/28%) to $66,250 (joint) and $44,350 (individual). See Form 6251, line 29 - change the numbers in the line's instruction accordingly. http://www.irs.gov/pub/irs-pdf/f6251.pdf (there's also a phaseout of this exemption for high income - the change to that phaseout isn't quite as clear, though it's hard to believe it would amount to anything other than substituting the new numbers in the worksheet for line 29). It will affect anyone subject to AMT tax, because it reduces the amount of income subject to AMT. As always, this is for information purposes only, does not constitute advice, and you should not rely upon it. Mark Freeland BnetOnewsX@sbcglobal.net >I hear vague reports of changes to AMT. Does anybody know the specifics >that congress has proposed? Will this effect people who are exercising >company stock options? And should this be well understood before the end >of 2007, a week from now, so that it can be acted on? > > Samson Posted by Mark Freeland on December 21, 2007, 12:47 pm Very hard to link to Thomas. Try this instead: http://thomas.loc.gov/cgi-bin/bssQuery/?&Opt=T&Db=110&srch=/bss/d110query.html&TxtStr=TAX+INCREASE+PREVENTION+ACT+OF+2007 (click on HR 3996 for status/text of legislation; click on "Text" for text, and then chose the last version - the one passed by House and Senate - HR3996ENR). > The IRS Wednesday promised updated forms within 72 hours on their website. > That gives people enough time to react (5 trading days). Or, you can read > the law now (apparently still waiting for Bush to sign): > http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.03996: > > Here's the text: > http://thomas.loc.gov/cgi-bin/query/D?c110:6:./temp/~c1100LSWUs:: Posted by Tad Borek on December 21, 2007, 1:48 pm Samson wrote: > I hear vague reports of changes to AMT. Does anybody know the > specifics that congress has proposed? Will this effect people who are > exercising company stock options? And should this be well understood > before the end of 2007, a week from now, so that it can be acted on? There are plenty of news articles out now about the bill that was just passed, raising the AMT exemption levels - the base level of income that is exempt from AMT. The bottom line is, the majority of people who were subject to AMT on Monday aren't subject to AMT today, but those who fell into it last year are likely to again this year. AMT can affect those who exercise stock options, specifically ISOs (incentive stock options), and the new bill didn't change that. You don't always trigger AMT by exercising options, but that's one of the "preference items" that gets people into the tax. See the Fairmark site for a summary of AMT and ISOs: www.fairmark.com And for tax year 2008, it's all on the table again...Congress just keeps passing one-year "patches" instead of addressing the tax itself. If it isn't patched again, AMT will be harsher in 2008 than 2007, and a 2007 exercise could save some taxes. Congress keeps passing these one-year extensions though. It is very difficult to figure out whether you'll pay AMT without plugging all your numbers into tax-projection software...it would be a good idea to talk with an accountant or other tax advisor if you're planning an option exercise and are concerned with AMT. Otherwise you can end up with a tax bill from an options exercise, even though you haven't sold anything to raise cash. -Tad