Just finished this year’s taxes.
One interesting twist ….
In 2012, like a lot of folks, I sold a bunch of stocks to beat Obama’s hike in the capital gains tax … from 15% to 23.8% (including the 3.8% ObamaCare surcharge)
As a result, my state tax bill paid in 2013 was higher than usual … Virginia’s share of the capital gains.
At first I was delighted this year.
Because, on my Federal return, I could deduct the higher-than-normal taxes that I paid to Virginia.
Unfortunately, the thrill was short-lived.
I’d forgotten about the AMT … you know, the Alternative Minimum Tax.
I’d forgotten, but TurboTax hadn’t.
Bottom line: My VA tax deduction got wiped away by the AMT calculation.
Like many folks, I had internalized that state income taxes are annoying, but no big deal since they get written off at the Federal level.
Not so if you’re among the millions of Americans who get snared in the AMT trap.
At least there is one small delight I get from the AMT …
While my case was unusual … a function of my 2012 stocks’ dump and accompanying high state income tax bill … for many folks it’s commonplace.
Specifically, folks living in high tax & spend Blue states – think, NJ, CT, NY – face the AMT more often than folks in lower tax states.
My bet: many folks in these high tax states probably think they’re getting a fat Federal deduction for their state taxes.
Not so if they “qualify” for the AMT.
Too bad ……