Many companies featured on Money advertise with us. Opinions are our own, but compensation and
in-depth research determine where and how companies may appear. Learn more about how we make money.

Advertiser Disclosure

The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.

Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

By timestaff
May 26, 2014

Oh the dreaded AMT! The alternative minimum tax was designed to prevent wealthy taxpayers from using loopholes to avoid paying their fair share of tax. But it has extended its claws down to many middle-income taxpayers, as well—much to their dismay.

The AMT is an alternative calculation of one’s tax bill that basically disallows many deductions, including state and local tax, childcare credits and property taxes. When you do your taxes, you are required to also determine your AMT (if you use software, the program does this for you). You pay whichever amount is higher. The people most likely to be stuck paying AMT are those with large state and local and real estate tax deductions, more than four dependents, and profits from stock options, to name a few common culprits.

Avoiding the AMT monster is tough. If you’ve been hit by it in the past—and are therefore likely to be hit again—consider upping your contributions to your qualified retirement accounts, like IRAs and 401(k)s. There’s a chance this could lower your adjusted-gross income enough to avoid the higher tax. (You can make IRA contributions until April 15 of the following year.) Careful planning throughout the year is also important. At the very least, you can try to minimize the damage by deferring certain deductible expenses (such as property taxes or state taxes) to the following year.

Read next: How Do I Fill Out a W-4?

Advertiser Disclosure

The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.

Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

EDIT POST