AMT tax credit strategies

February 27, 2005 7:09 PM

A few year ago I had to pay AMT on some ISO stock. Since I've sold it for far less than the amount of AMT tax that I paid in, I've got a large AMT tax credit hanging out there. Are there any strategies that anyone can suggest to get some of this money back?

For those that want a more detailed explanation, here goes. With ISOs, I triggered AMT... or Alternative Minimum Tax. With this different tax system, I had to prepay capital gains tax on the stock that I received with stock options. I paid tax on these shares at $48/share.... I sold them for $4 a share on a basis of $3. So, there's about $12/share in tax credit hanging out there.

The problem is this. Because it was on Capital Gains, I can only take the credit against stock gains. At the rate I'm going, its going to take me 20 years to get the credit back.

So, any strategies you can suggest... any ideas that your tax advisor might have suggested, would be greatly appreciated.

posted by wflanagan to Work & Money (6 answers total)

It's worse than that, if I understood my accountant correctly--you can only use the credit against future AMT, not any old capital gains.

ReformAMT
posted by billsaysthis at 9:08 PM on February 27, 2005

as i did it a few years under the guidance of a tax man, that's false. you can claim AMT as a direct credit against your income tax. that is, its not just a deduction from your earnings, you actually can directly subtract AMT paid from the amt owed the IRS. so your math is way off. i don't really see where you're getting $12/share from, but this shouldn't matter. Assuming you didn't qualify for AMT again, you can subtract the amount you owed the following year just direct from the amount you owed (but you can't pass 0--you can' t pay a negative amt of taxes, and the balance would just carry over to next year, same deal).
I'm fairly confident about this.
posted by alkupe at 9:37 PM on February 27, 2005

I think alkupe is correct, but you really should get in touch with an accountant familiar with these issues. Not every accountant has sufficient expertise in this area.
posted by caddis at 5:31 AM on February 28, 2005

here's a link that supports what i am saying . It sounds to me like with the help of an experienced accountant (definitely agree with caddis) you may have a nice check coming.
posted by alkupe at 10:19 AM on February 28, 2005

One point of correction, the AMT credit is limited to the tax due under the regular calculation minus the AMT tax due. So if you would owe 30K normally, and 28k under the AMT calc, you can recapture 2k of previously paid AMT. I am not sure that was clear under your original comment alkupe. The problem with AMT credits is that unless your income drops precipitously, you will never really recapture all of the AMT paid. Of course, we should all have such problems.
posted by caddis at 2:23 PM on February 28, 2005

point taken. in my case, and it sounds like potentially in the case of wflanagan, a one-time excercise of ISOs incurred AMT, which i normally don't qualify for. so i was able to recoup that charge.
and that about wraps this one up.
posted by alkupe at 6:38 PM on February 28, 2005