The AMT Ambush
The Alternative Minimum Tax, or AMT, is a second tax calculation that can quietly increase what you owe.
It removes or limits certain deductions and adds special income items back into the calculation. High-income households can face a major surprise even when their regular tax planning looks solid.
Do not assume your normal tax estimate includes it.
The Danger Zones
You may face higher AMT exposure if you are:
- A high-income W-2 employee
- Exercising Incentive Stock Options
- Claiming large deductions
- Living in a high-tax state
- Receiving a large bonus or stock payout
- Combining several major income events in one year
Incentive Stock Options are especially dangerous.
You may owe AMT based on the difference between the exercise price and the stock’s market value, even when you did not sell the shares or receive cash.
Your AMT Defense
Control the timing of ISO exercises.
Do not exercise every option in one high-income year without running a projection first. Spreading exercises across multiple years may reduce the AMT spike.
Plan charitable giving carefully.
You may be able to combine several years of donations into one year through a Donor-Advised Fund. This can create a larger deduction when it provides the greatest tax benefit.
Run both tax calculations before acting.
Your advisor should compare regular tax and AMT under multiple scenarios. Test bonuses, stock exercises, capital gains, deductions, and charitable gifts before December 31.
Stress-Test Your Tax Plan Now
Waiting until tax season to plan for the AMT guarantees you will lose valuable planning opportunities. Let our advisory team run a multi-year projection to protect your income and stock options from unexpected phaseouts. Contact us today or log into our Client Portal to schedule an AMT stress test.
📧 Email: oshamsi@oscpatax.com
📞 Phone: (214) 253-8515
General information only, not tax advice. Always consult a tax professional to evaluate your specific circumstances and state rules.
