State tax

All too often regulations seem to hurt the middle income groups more than others and the alternative minimum tax (ATM) is one of those regs. In 2017, 29.4 percent of households with “expanded cash income” (which is a broad measure of income) between $200,000 and $500,000 will be affected by the AMT (table 1). That number rises to 62.9 percent for those with incomes between $500,000 and $1 million. In contrast, only 19.9 percent of households with incomes greater than $1 million will be on the AMT. This issue is important at this time since the new tax law supposedly hurts those who deduct state income tax from their federal tax. Not so fast. When the state tax is deducted the deduction is disallowed when the AMT kicks in so that these middle income people have not been able to use the state income tax deduction in the past and will not be allowed in the future as long as the AMT remains in force. Lower income people whose state tax is less than $10,000 will still be able to deduct up to that amount. In Minnesota it takes incomes of $150,000 or more to pay that much state income tax. The loss of state tax deduction is all hype as it was not there to lose. Line 3: Taxes: In calculating the AMT, you cannot take itemized deductions for stateand local income tax, real estate taxes and personal property taxes, even though these are deductible on your regular return.