Investlist Faq-O-Matic :
Taxes, Taxes and more Taxes
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In the US there are two tax systems which apply to EVERYONE. It is a common misconception that only some people must pay income tax, and certain other people pay AMT. This is a fallacy: you must pay the greater of the tax due for normal income tax or AMT.
While "most people" never had to worry themselves about AMT in the past, this is rapidly changing. Per an article in the SJ Merc News:
>>>>>>>>> "Congress created the AMT in 1969 because lawmakers were outraged that 155 taxpayers made more than $200,000 yet paid no federal income tax. By 2010, the AMT will strike nearly 32 million Americans -- including nine out of 10 taxpayers who earn more than $100,000, according to the Joint Committee on Taxation. At that rate, the AMT will effectively replace the regular tax system for residents of Santa Clara County, where the median income for a family of four already is $105,500." <<<<<<<
Turbotax automatically calculates both ordinary income tax and AMT without you needing to enter additional information.
AMT payments are due quarterly -- not on April 15! This means if you perform an action that could trigger AMT, you should calculate your tax liability that same quarter. Underpaying AMT can result in interest charges and penalties.
For further information see Fairmark Press, or search yourself using google.
If you have ISO stock options, and decide to buy-and-hold those options, your tax liability continues to exist even if the value of the stock (you are holding) goes down. The only reason to buy-and-hold ISOs is to pay capital gains tax rates (circa 20%) instead of normal income tax rates (circa 38%) on the gains. The risk is that if the stock depreciates, the tax liability may exceed the value of the stock.
If you have NQ stock options, it is never advantageous to buy-and-hold those shares (Buy and Hold - Analysis)
- The short answer not unless you have a dedicated space used exclusively for work, and is signed off by Cisco. In some cases though you might be entitled to, all postings on Investlist state that it is hardly worth the effort, and quite often doesn't make financial sense either.
[Michael Carey] My understanding is that one of the tests for deductibility effectively amounts to "dedicated space", so you cannot claim for working at home on the dining room table, as an example. Also, when you ultimately sell your home, I believe that any home office deductions claimed while you owned the property need to be reconciled at the time of sale, and effectively reduces the size of the capital gains exemption you may be eligible for, triggered by the sale. Having claimed a home office for a number of years, I stopped doing so, as the capital gains hit was potentially bigger, and more of a pain to document, etc., than the home office deduction I was able to claim each year.
See the IRS posting for additional details and all the clauses that apply.
Gifts