• 401kMany taxpayers owe the alternative minimum tax (AMT) rather than the regular income tax.
  • Officially, the AMT has two tax rates: 26% and 28%, depending on your income.
  • The AMT also has an exemption amount that phases out with AMT income over $112,500 (over $150,000 on a joint return).
  • As the AMT exemption phases out, your tax rate actually might be 32.5% or 35%. Thus, some
    taxpayers who pay the AMT will owe as much as 35 cents in tax for every extra dollar of income
    they report, as opposed to the “official” 26 or 28 cents on the dollar.
  • The higher the AMT rate, the greater the benefit of deferring tax with a traditional 401 (k).
2011 Q3 | Adjusting for the AMT
Tagged on: