Rule No. 1: Don’t assume you’re exempt.
The 2017 Tax Cuts and Jobs Act made the alternative minimum tax rules much more taxpayer-friendly for 2018-2025, and significantly reduced the odds that you’ll owe the tax. And if you do still owe the dreaded AMT, you’ll probably owe quite a bit less than before. That said, if you had lots of income in 2021, from capital gains or whatever, you might be exposed.The AMT is a separate federal income tax system with a family resemblance to the more-familiar regular federal income tax system.
Key point: Proposed legislation would increase some regular tax rates for some higher-income folks. If that happens, I don’t think the higher rates would take effect until 2022.Under the AMT rules, you are allowed an inflation-adjusted AMT exemption , which is subtracted in calculating your AMT income. The TCJA significantly increased the exemption amounts for 2018-2025.
As I just explained, the TCJA increased both the exemption amounts and the income levels where they begin to be phased out. That’s helpful if you have lots of income in 2021, but it doesn’t necessarily make you AMT-exempt. For 2018-2015, the new law generally disallows itemized deductions for home equity loan interest. However, in some cases, it will be possible to treat a home equity loan as generating deductible qualified residence interest if you used the loan proceeds to acquire or improve your first or second residence and your total mortgage debt, including the home equity loan, does not exceed $750,000, or $375,000 if you use married filing separate status.
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