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Discussion Starter · #1 ·
Saw an article today that explains a little more about the tax credit for Hybrids next year, and YOU may end up getting nothing! You need to be aware that the credit will NOT reduce your regular tax bill below your alternative minimum tax. That means that if you are subject to the AMT, as more and more people are each year, you get ZERO tax credit for buying a hybrid!
 

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Discussion Starter · #4 ·
richard schumacher said:
Eh. Anyone who makes enough to be subject to AMT doesn't need the credit.
That is far from the truth. The AMT was designed in the 1960's to catch the top 200 rich individuals -- BUT -- it was never indexed for inflation and they found way around it. Now it hits mostly middle class families that either have many kids or who live in states with both high income and property taxes. This tax does not sock the rich, it hits more of the masses every day! If you live in NY,NJ or CA itemize deductions and own your own home watch out, you too will be hit soon.
 

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What Kirby said. Big time.
Sorry, Richard. You couldn't be more wrong.

Our current adminstration and congressional leaders pass tax cuts for the rich with reckless abandon, but they ignore the widening effects of the AMT, which, thanks to a lack of indexing for inflation, is capturing more and more of the middle class every year. And they won't do a thing about it, because it's becoming a giant tax revenue source.

And as long as none of their big donors are getting hurt by it...
 

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I well remember what a plague this AMT was back in the dot-com boom days when all the non-vested stock options counted as income, and when they turned worthless the same year, people still had to pay the thousands or hundreds of thousands of dollars of tax on the worth at the time they received them. There were even some suicide reports from people who got hit with this nasty rule and couldn't afford to pay.
 

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paul16451 said:
I well remember what a plague this AMT was back in the dot-com boom days when all the non-vested stock options counted as income, and when they turned worthless the same year, people still had to pay the thousands or hundreds of thousands of dollars of tax on the worth at the time they received them. There were even some suicide reports from people who got hit with this nasty rule and couldn't afford to pay.
Since you explained this completely wrong, I'm guessing you didn't have any stock options. AMT counts the paper-gain of the stock you bought at discount using incentive stock options as income. Under the normal tax system, this is not counted as income until you sell the stock and get an actual gain.

The problem people ran into was they had to pay AMT on the paper-gain, but then the value of the stock they owned plummeted, and they didn't have anything to pay the taxes with. And they didn't sell the stock immediately because they were trying to hold onto it for one year so they could get favorable tax treatment of their ISOs. NQs (non-qualified stock options) don't get this favorable tax treatment.

It's just plain irresponsible to be making decisions regarding assets of significant value relative to your net worth, and not fully understanding the tax implications. At least hire an accountant or tax attorney to help you. I don't have much sympathy for people who lost their houses or worse due to greed and ignorance. I took taxation in MBA school during the dot-com boom just so I could make better decisions regarding my ISOs.
 

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I don't have much sympathy for people who lost their houses or worse due to greed and ignorance.

I am slightly different, though. I don't have sympathy for people who lost their house or worse due to greed, but not ignorance. I blamed the companies those poeple worked for. They should have informed their emplyees about such AMT issues. It was a huge problem in Silicon Valley back then.

I know and agree that ignorance of laws is not a defense for one's action. But, you should also consider that many people are not so well educated or informed as they should be. Therefore, my sympathy for them.
 

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ceric said:
I don't have much sympathy for people who lost their houses or worse due to greed and ignorance.

I am slightly different, though. I don't have sympathy for people who lost their house or worse due to greed, but not ignorance. I blamed the companies those poeple worked for. They should have informed their emplyees about such AMT issues. It was a huge problem in Silicon Valley back then.
The company I work for offers regular lunchtime seminars where outside experts are brought in to speak about many different personal finance topics, such as saving for retirement, buying a home, etc. The seminar covering tax implications of exercising stock options is offered several times a year. It's probably less important now, since we only award NQs and not ISOs, and I'm guessing we'll probably stop awarding stock options once we begin expensing them.

They didn't always offer these classes though, and I recall some stories from the early days about people who did lose their houses, etc. due to large tax bills.
 
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