Latest news with #AMTI
Yahoo
13-03-2025
- Business
- Yahoo
What Triggers the Alternative Minimum Tax (AMT)?
The alternative minimum tax (AMT) is designed to ensure that certain taxpayers who benefit from various deductions and tax preferences still pay a minimum level of tax. Several factors can trigger AMT liability, including high income, large deductions and financial activities that create differences between regular taxable income and the income calculated under the AMT system. Common triggers include bringing in substantial earnings, taking significant itemized deductions, exercising incentive stock options and using accelerated depreciation methods. A can help you manage your investments and anticipate the tax implications of different financial decisions. The alternative minimum tax was created in 1969 to prevent high-income taxpayers from using loopholes and deductions to avoid paying taxes. Some taxpayers must compute their tax liability using two methods – one following the standard tax rules and another under the alternative AMT framework. Unlike the regular tax system, which allows various deductions and exemptions, the AMT has its own set of rules and exemptions. This can lead to unexpected tax bills for those who are unaware of the implications. Certain deductions and exemptions that are allowed under the regular tax system are added back to the taxpayer's income, resulting in the alternative minimum taxable income (AMTI). This AMTI is then taxed at flat rates. If the AMT liability is greater than the regular tax liability, the taxpayer must pay the higher amount. AMT applies when certain income levels, deductions or financial activities create a lower tax liability under the regular tax system. Here's a look at common triggers of AMT: High income: Taxpayers with substantial income from salaries, investments or other sources are more likely to be subject to the AMT. Large deductions: Claiming significant deductions for state and local taxes (SALT), medical expenses or home mortgage interest can increase the likelihood of triggering the AMT. Incentive stock options (ISOs): Exercising ISOs can result in a large spread between the grant price and the market price, which is considered income for AMT purposes. Depreciation of business assets: Accelerated depreciation methods can lead to differences between regular taxable income and AMTI. Net operating loss deductions: These deductions are limited under the AMT system. Foreign tax credits: The AMT may limit the use of foreign tax credits, increasing taxable income. Exempt-interest bonds: Interest from specified private activity bonds that are exempt from the regular income tax are included in AMTI. SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. Calculating your AMT tax bill involves several steps. First, you need to determine your AMTI by adding back certain deductions and preferences to your regular taxable income. Common adjustments include state and local taxes (SALT), mortgage interest on home equity loans and medical expenses. Once you have your AMTI, subtract the AMT exemption amount, which varies based on your filing status and is adjusted annually for inflation. For example, in 2025, the exemption amount is $88,100 for single filers and $137,000 for married couples filing jointly. The remaining amount is your taxable income for AMT purposes. Here are the exemption amounts and phaseout thresholds for 2025: Filing Status Exemption Amount Phaseout Threshold Complete Phaseout Married Filing Jointly or Surviving Spouse $137,000 $1,252,700 $1,800,700 Unmarried Individuals $88,100 $626,350 $978,750 Married Filing Separately $68,500 $626,350 $900,350 Estates and Trusts $30,700 $102,500 $225,300 In 2025, the exemption starts to decline when a taxpayer's AMTI exceeds $1,252,700 for joint filers and $626,350 for single filers. For every dollar of AMTI beyond these thresholds, the exemption is reduced by 25% of the excess income. Next, you apply the AMT tax rates to your AMTI. The AMT has two tax rates: 26% and 28%. For 2025, the 26% rate applies to income up to $239,100 ($119,550 if married filing separately), while the 28% rate applies to income above this threshold. Finally, compare your AMT tax liability to your regular tax liability and pay whichever is higher. While it may not be possible to completely avoid the AMT, there are strategies to minimize its impact. Here are some common approaches: Manage deductions: Be mindful of deductions that can trigger the AMT, such as state and local taxes, mortgage interest and miscellaneous itemized deductions. Consider timing these deductions to minimize their impact. Exercise ISOs strategically: If you have ISOs, carefully plan when to exercise them to avoid a large AMT liability. Spreading exercises over multiple years can help. Defer income: If possible, defer income to future years when you may not be subject to the AMT. This can be particularly useful for self-employed individuals or those with flexible income sources. Use tax credits: Some tax credits, like the foreign tax credit, can help offset your AMT liability. Consult a tax professional: Given the complexity of the AMT, working with a tax professional can help you develop a personalized strategy to minimize your exposure. The alternative minimum tax, or AMT, is a distinct tax system designed to ensure that high-income individuals pay a minimum level of taxes, even if they qualify for numerous deductions under the regular tax system. The AMT operates by adding back certain tax preferences and deductions to a taxpayer's income, resulting in an alternative minimum taxable income. If the AMT liability exceeds the regular tax liability, the taxpayer must pay the higher amount. Placing different asset types in accounts based on their tax treatment – a strategy known as asset location – can reduce tax exposure. Tax-efficient investments, like index funds and municipal bonds, are best held in taxable accounts, while tax-inefficient investments, like bonds and REITs, benefit from tax-deferred or tax-free accounts. Additionally, prioritizing long-term capital gains (taxed at lower rates) over short-term gains can further optimize tax efficiency. A financial advisor with tax planning expertise can help you build a tax strategy tailored to your situation. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now. Photo credit: © © © The post What Triggers the Alternative Minimum Tax (AMT)? appeared first on SmartReads by SmartAsset.
Yahoo
13-03-2025
- Business
- Yahoo
How to Calculate the Alternative Minimum Tax (AMT)
The alternative minimum tax (AMT) calculation determines whether a taxpayer must pay an additional amount beyond their regular income tax liability. To calculate AMT, taxable income is adjusted by adding back certain deductions to determine alternative minimum taxable income (AMTI). An exemption is then applied, though it phases out at higher income levels. After subtracting the exemption, the remaining AMTI is taxed. If the calculated AMT exceeds the regular tax liability, the taxpayer must pay the difference. A with tax expertise can help you plan for AMT and other tax liabilities. . AMT is a separate tax system designed to limit the use of deductions and credits that could significantly lower a taxpayer's federal income tax liability. It applies primarily to high-income individuals who claim substantial deductions, exercise incentive stock options or earn income from tax-preferred investments. Common AMT triggers include high state and local tax (SALT) deductions, large capital gains, incentive stock options and certain business expenses. IRS Form 6251 helps determine AMT liability by guiding taxpayers through necessary income adjustments and tax calculations. AMT applies only if the calculated AMT liability exceeds the amount owed under the standard tax system. To offset some of its impact, AMT includes an exemption amount, which phases out for taxpayers with higher incomes. While adjustments for inflation have reduced its reach, AMT still affects those with complex financial situations, particularly individuals with large capital gains or deductions relative to their earnings. SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. The AMT calculation follows a process separate from regular income tax, adjusting taxable income and applying different rates. Here's how to determine AMT liability. Begin with your regular taxable income, and then add back deductions not allowed under AMT. These include SALT deductions, certain business expenses and miscellaneous itemized deductions. Income from incentive stock options (ISOs) and certain municipal bond interest may also need to be included. The 2025 AMT exemption is $88,100 for single filers and $137,000 for joint filers. However, if alternative minimum taxable income exceeds $626,350 for single filers or $1,252,700 for joint filers, the exemption is gradually reduced by 25% of the excess amount. 2025 Alternative Minimum Tax (AMT) Exemption Thresholds Filing Status Exemption Amount Phaseout Threshold Complete Phaseout Married Filing Jointly or Surviving Spouse $137,000 $1,252,700 $1,800,700 Unmarried Individuals $88,100 $626,350 $978,750 Married Filing Separately $68,500 $626,350 $900,350 Estates and Trusts $30,700 $102,500 $225,300 For all filers, with the exception of those married filing separately, AMTI remaining after the exemption is taxed at 26% on the first $239,100 and 28% on any income above that. The threshold for those married filing separately is $119,500. For example, a married couple filing jointly with $1.4 million in AMTI exceeds the $1,252,700 threshold by $147,300. The exemption is reduced by 25% of this excess ($36,825), leaving a final exemption of $110,475 ($147,300 – $36,825). The taxable AMTI is then $1,289,525. The first $239,100 is taxed at 26% ($62,166), while the remaining $1,060,725 is taxed at 28% ($297,003), bringing the total AMT liability to $359,169. Lastly, the tentative AMT is compared to the taxpayer's regular income tax. If it is higher, the difference must be paid as AMT. For example, if the couple's regular income tax liability would have been $300,000 thanks to various deductions, they would still have to pay the higher AMT amount. Taxpayers who anticipate being subject to AMT can take steps to reduce their liability or prepare for the added cost. One approach is to time income and deductions strategically. For example, they might defer capital gains or accelerate deductible expenses in years when AMT is less likely to apply. Since SALT deductions are disallowed under AMT, high-income filers may benefit from managing property tax payments or considering tax-efficient investments. Using AMT-friendly investments, such as tax-exempt municipal bonds that are not subject to AMT rules, can help reduce AMTI. For those with ISOs, exercising options strategically or selling shares within the same tax year can prevent unexpected AMT liabilities. Consulting a tax professional before making major financial decisions can help identify tax-efficient strategies and ensure AMT liability is factored into overall financial planning. AMT affects certain taxpayers by adjusting income calculations and limiting deductions, leading to a separate tax liability if the AMT exceeds regular tax obligations. While inflation adjustments have reduced its reach, individuals with high capital gains, large deductions or incentive stock options may still be subject to it. Understanding how to calculate AMT allows for better financial planning, whether through tax-efficient investments, strategic timing of income or managing deductions. Reviewing potential AMT exposure before year-end can help taxpayers anticipate any additional liability and explore strategies to minimize its impact where possible. Starting at age 73, retirees must begin taking required minimum distributions (RMDs) from tax-deferred accounts like traditional IRAs and 401(k)s. These distributions increase taxable income and can push individuals into higher tax brackets. Strategies such as Roth conversions before RMD age or qualified charitable distributions (QCDs), which allow tax-free donations to charities directly from an IRA, can help reduce taxable income and manage RMD-related tax burdens effectively. A financial advisor who offers tax planning services can be a valuable resource if you're looking for ways to reduce your tax liability. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now. Photo credit: © © Onphalai, © post How to Calculate the Alternative Minimum Tax (AMT) appeared first on SmartReads by SmartAsset. Sign in to access your portfolio
Yahoo
26-02-2025
- Politics
- Yahoo
Vietnam Is Also Expanding Its Foothold in the South China Sea
Most coverage of the South China Sea territorial disputes has understandably centered on China's assertiveness in pressing its territorial claim to the entire body of water. After all, using its notorious 'nine-dash line' as justification, China has over the past 15 years undertaken extensive land reclamation projects and militarized the features it occupies in the disputed sea. As a result, less attention has focused on the activities of other claimants, which include Vietnam, the Philippines, Malaysia, Indonesia and Brunei, in addition to Taiwan, whose claims replicate those of Beijing. Of them all, Vietnam has been by far the most proactive in asserting its own sovereignty claims in the South China Sea. These center on the Paracel Islands—referred to as Hoang Sa in Vietnam—in the northern part of the disputed sea, roughly equidistant from China's southern island province of Hainan and Vietnam's central coastline, and the Spratly Islands—referred to as Truong Sa in Vietnam—about 450 miles further south. While China has exercised de-facto control of the Paracel Islands since a brief battle with then-South Vietnam's naval forces in 1974, Hanoi has focused its efforts on boosting its defenses on features it controls in the Spratly Islands. According to the Asia Maritime Transparency Initiative, or AMTI, the pace of construction has picked up in recent years, to such an extent that Vietnam's total dredging and landfill in the South China Sea amounts to 2,360 acres—roughly half of China's total of 4,650 acres. By comparison, four years ago Vietnam's total was just 329 acres, less than one-tenth of China's total at the time. On Hanoi's largest feature, Barque Canada Reef—known as Bai Thuyen Chai in Vietnam—a new runway is under construction, with reclaimed land meaning it could stretch to just under 2 miles in length. That would potentially make it long enough for larger military transport, surveillance and bomber aircraft to take-off and land. For now, Vietnam's only runway in the region—located on Spratly Island—is significantly shorter, at just under a mile. Several other Hanoi-occupied features, of which there are 27 in total, could also form ideal sites for new runways after recent and ongoing expansion work, including at Pearson, Ladd and Tennent reefs. Vietnam's recent construction, as reported by AMTI, has added to existing pillbox structures built over a longer period of time at other islets and features, as well as boat ramps, coastal fortifications and outward-facing concrete pads connected to bunker formations, indicating Hanoi's rising capability to defend its maritime outposts from external military threats. It must be noted, however, that Beijing remains by far the most powerful actor in the sea, with garrisons of troops, fighter jets and anti-ship and anti-aircraft missile systems reportedly deployed to its three largest features in the Spratly archipelago—at Fiery Cross, Mischief and Subi reefs. To get more in-depth news and expert analysis on global affairs from WPR, sign up for our free Daily Review newsletter. Hanoi's actions have been largely driven by Beijing's militarization of the sea, against a background of historical rivalry between the two countries that endures despite shared ideological ties between their respective ruling communist parties. Vietnam's rapid building work, cementing the establishment of a permanent presence on its own features, has arguably prevented China from taking the kinds of aggressive actions reported by the Philippine coast guard in recent years near Scarborough and Second Thomas shoals in the southern portion of the sea. Despite Manila's assertion of sovereignty and its geographical proximity to both, Chinese vessels have allegedly sought to block resupply missions and engaged in dangerous maneuvers targeting Philippine vessels, enflaming tensions and provoking a strong rebuke of Beijing by Manila. Reactions to Vietnam's activities by the Philippines and other claimants, however, have been decidedly more muted than their responses to Chinese actions. A Philippine coast guard spokesperson explained Manila's differing stances last year, telling reporters that 'Vietnam focuses on minding their own affairs. They do not engage in harassing our fishermen or illegally deploying coastguard vessels and maritime militia in the waters surrounding our occupied maritime features.' Since taking office in June 2022, Philippine President Ferdinand Marcos Jr. has taken a firmer line on China than his predecessor, former President Rodrigo Duterte. That has included efforts to intensify maritime cooperation with other claimants, resulting in the first-ever joint coast guard drills with Vietnam last August, in waters west of Luzon. A Vietnamese ship with a crew of 80 docked in Manila for four days amid the exercises, which included the use of water cannon to repel other vessels, a tactic the Chinese coast guard has deployed several times against Philippine ships in the past year. Malaysia, the other major South China Sea claimant state in the Association of Southeast Asian Nations, or ASEAN, has been more friendly toward China than the Philippines, especially since Prime Minister Anwar Ibrahim's election in November 2022. Malaysia reportedly sent a letter to Hanoi last October raising concerns over Vietnam's island-expansion activities and protesting the presence of Vietnamese fishermen in Malaysian waters. Yet the following month, any dent in ties appeared to have been repaired when Anwar hosted Vietnamese Communist Party General-Secretary To Lam in Kuala Lumpur, upgrading bilateral ties to a 'comprehensive strategic partnership' and committing to uphold freedom of navigation and overflight in the South China Sea. The other ASEAN claimant states have generally turned a blind eye toward Vietnam's land reclamation, as Hanoi's solidified control over its features denies China total hegemony in the South China Sea. This is a core aim shared by all claimants, despite their ongoing disputes among themselves based on historical rights and overlapping Exclusive Economic Zones. Vietnam has itself been very quiet when it comes to China's land reclamation. Given the two countries' close political ties and the fact that China is also Vietnam's largest trading partner, Hanoi has no intention of antagonizing Beijing over the maritime dispute. Last year, Vietnam even began conducting quarterly coast guard patrols in the Gulf of Tonkin with its powerful northern neighbor. And in Vietnam's current political climate, with the ascendant To Lam—considered a hardliner—and other 'party-first' traditionalists in control of the Politburo after Vietnam's recent reshuffle of its top leadership, there is little sign that Hanoi will look to weaken its historically important relationship with China. This is not to say that tensions at sea may not flare up, a point that is underscored by the history of repeated but short-lived conflicts between the two countries. In 1979, China invaded Vietnam in response to Vietnam's occupation of Cambodia to topple the Khmer Rouge the previous year; the two sides fought a bloody monthlong war before the Chinese were forced to retreat. The two sides have clashed in disputed waters, too. The Johnson South Reef skirmish in 1988 led to the loss of 64 Vietnamese sailors, while China's positioning of an oil rig close to the Paracel Islands in May 2014 triggered a maritime stand-off in which both sides' vessels bumped each other and exchanged water cannon fire over several weeks, sparking rare anti-China street protests in Vietnam. Despite these past clashes, however, Vietnam has refrained from placing advanced weapons systems on its features in the South China Sea, contrary to earlier reports. Hanoi is resolute in sticking to its 'Four No's' foreign policy, which includes 'no military alliances' and 'no threat or use of force in international relations.' The absence of hostile Chinese actions toward Vietnam at sea in recent years of the kind seen directed at other claimant states—notably the Philippines—perhaps reflects a reciprocal calculus in this sense. At times, however, Beijing has voiced its opposition to Vietnam's building work and recently conducted live-fire exercises in the Gulf of Tonkin, following Hanoi's demarcation of its territorial waters in the area. Hanoi, for its part, has pushed back rhetorically and reaffirmed its sovereignty claim over the Spratlys and Paracels in response to clashes between local Chinese law enforcement vessels and Vietnamese fishermen. One such incident took place last September, when men armed with iron rods boarded a small Vietnamese fishing boat that had been stopped by two larger steel-hulled 'foreign' ships near the Paracel Islands. Up to 10 Vietnamese crew members were reportedly beaten, with three suffering broken limbs, before being ordered via a translator to sail back to the Vietnamese coastline. Vietnam's growing defense and security ties with the U.S., viewed as a hedge against China, have served as a guardrail against more serious escalations. Ties with Washington reached new heights in the latter years of former President Barack Obama's time in office, culminating in 2016, when the U.S. lifted a longstanding ban on providing lethal weapons to Vietnam that dated back to the post-Vietnam War period. President Donald Trump visited Vietnam twice during his first term, while in September 2023, under then-President Joe Biden, Vietnam's ties with the U.S. were upgraded to a 'comprehensive strategic partnership'—matching the level of Hanoi's ties with Beijing. It's no coincidence that a primary focus of Hanoi's security ties with Washington has been on improving its capacity to police its waters. The U.S. has transferred two refurbished Hamilton-class cutters to Vietnam for use by its coast guard, in 2017 and 2021, having also delivered 18 'metal shark' patrol boats. Aligning with the United States' aim to ensure freedom of navigation in the South China Sea, Vietnam has also welcomed U.S. Navy ships to its ports with increasing regularity. In 2018, the USS Carl Vinson became the first aircraft carrier to dock in Vietnam since the end of the Vietnam War in the 1970s, followed by the USS Theodore Roosevelt in 2020 and the USS Ronald Reagan in 2024. The flagship vessel in the U.S. Navy's Japan-based 7th Fleet, the USS Blue Ridge, also made a high-profile port call at Cam Ranh in central Vietnam last July alongside the US Coast Guard cutter Waesche. Trump's return to office, however, has brought concerns that Hanoi's ties with the U.S. might suffer, given his threat of 20 percent across-the-board tariffs and Vietnam's large trade deficit with Washington, which totals $104 billion—almost three times the $38 billion it amounted to in 2017 at the start of Trump's first term. It is possible that Vietnam could offset this by purchasing commercial aircraft, liquefied natural gas and more weapons from the U.S., especially as arms supplies from Russia—Vietnam's traditional ally—have dried up due to Moscow's need to commit resources to the ongoing war in Ukraine. On the other hand, given Trump's transactional foreign policy style—including his willingness to deal with authoritarian regimes—and long-held anti-China stance, Vietnam is arguably well placed to benefit from Trump's return and cement its status as a strategically important mid-sized power in Asia. That said, Hanoi's ties with the U.S. are unlikely to expand beyond advancing cooperation in areas of shared strategic interest. As a result, Vietnam will stick to its principle of 'bamboo diplomacy,' remaining firmly rooted while not swaying too far in either direction. Maintaining a good relationship with both major powers and avoiding alignment is key if Vietnam is to maintain the autonomy that has enabled it to navigate tensions and expand its foothold in the South China Sea until now. Michael Hart is a writer and researcher covering conflict and postwar issues in Southeast Asia. He has researched for the International Institute for Strategic Studies (IISS) and Action on Armed Violence (AOAV), and has contributed to publications including World Politics Review, The Diplomat, and Asia Sentinel. He is Editorial and Social Media Coordinator at The Pacific Review journal, based at the University of Warwick. The post Vietnam Is Also Expanding Its Foothold in the South China Sea appeared first on World Politics Review.
