Capital gains are income derived from the sale of property, most typically investment property. While capital gains are not directly an AMT preference item, they do have an impact on a taxpayer’s Alternative Minimum Tax, and, therefore, are an essential element of AMT planning. One real-life scenario with which the writer is familiar involved a retiree with what one would call a typical investment portfolio, including mutual funds, and it was solely a larger-than-usual year-end capital gain distribution from one mutual fund that threw that individual into the AMT.

For a little review, capital gain income historically has been taxed at a rate lower than the rate that applies to other, “ordinary,” income such as salaries and wages and interest income. This lower rate applies only to “long-term” capital gain (LTCG), which means the taxpayer must hold the property for over one year before selling it. Under current law, most dividend income also receives this favorable LTCG treatment.

In general, the tax rates that apply in computing the Alternative Minimum Tax are different from the rates that apply in computing the Regular Tax. However, LTCG is taxed at the same rate for both computations – typically 15%. Thus, a LTCG by itself is not an AMT item. Despite this treatment, however, a LTCG definitely can be a factor that triggers the AMT.

Here’s what happens. First, every taxpayer is entitled to an AMT Exemption amount. This Exemption is designed to prevent taxpayers with only small AMT items from paying the AMT. For example, a couple filing a joint return for 2009 is entitled to an Exemption of $70,950. Unfortunately, however, this Exemption is phased out as the taxpayer’s income increases. The actual phase-out is the loss of $1 of Exemption for every $4 of additional income (i.e., at a 25% rate). So even though LTCG is not a preference item, the more capital gain a taxpayer has the more of his Exemption is phased out and, thus, the more likely he is to pay the AMT. This is exactly what happened to the retiree mentioned above, who, by the way, also happened to be 90 years old at the time. While it may not seem right, there certainly is no AMT forgiveness even for old age!

To illustrate how this works, assume a taxpayer realizes an additional $10,000 of LTCG. In comparing the tax rate schedules for the AMT and the Regular Tax, one would conclude that this capital gain income would have no impact on the taxpayer’s AMT because it is taxed at the same rate under both computations. But here’s what actually happens by adding $10,000 to taxable income:

(a) Income increase of $10,000

(b) AMT Exemption Phase-out (25%) = $2,500

(c) Increase in AMT Income (a) + (b) = $12,500

This increase in AMT income at a rate 25% greater than Regular taxable income is the problem. It is simple math – the more AMT income taxed, the greater the chance of being pulled into …


Today we are going to talk about one of the most important part of our lives, personal finance management strategies. With enormous amount of information on the web, sometimes it is hard to sort things out and to know exactly where to start and what to do.

We may look at other successful people and think they were born with the finance management skills. Nevertheless it is crucial for us to understand these wealthy people set great example for us. In order to obtain and to develop our own finance management skills, we have to act on our own.

Working as a financial coach and having experience of seeing various peoples’ financial backgrounds, it is easy to come to a certain conclusion that both positive and negative personal finance management has its roots in how the person was raised and what he or she was taught about money management in general. But not to get too much in depth into it, it is highly important for us to look at the people who are constantly looking for ways to make their lives financially better. What do these people do? They continuously educate themselves, and we have to learn from them. Goal number one for us today is to become a Personal Coach for ourselves.

Living our day-to-day lives, we come across numerous challenges. Whether we realize it or not, we deal with them in our own personal way. Benefit from these situations and for a minute become thankful to yourself for what you have already achieved. By doing that you are already multiplying positive aspects of your life.

When you come across uncomfortable situations, the most important question to ask is “What can I do about it, now?” While there are thousands of people who struggle to get a decent paycheck or to have a stable financial income, self-motivated people have set a goal to learn how they can manage their finances better. These unique people have fully replaced money struggle with sufficiency and joyful drive to make money. Dear reader, please note, it is important not ‘to earn’ money, but ‘to make’ money.

What does the money management has to do with on-line payday loan services? Or we should better say how you can benefit from using the on-line payday loan services? Well, the first aspect is to take a temporary measure in order to deal with your urgent financial needs. The second aspect is to find on-line payday loan services with low interest rates and beneficial conditions. The third aspect is to know exactly your current finance strategy and to follow it.…