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TAX ANSWERS
Fear of the AMT
by Kevin McCormally

I am recently married, and my wife and I have decided to buy a new house (new construction). I currently own a house that we intend to keep and rent. The house is in my name only.

I am concerned that we will be hit with the alternative minimum tax once we take possession of the new house and claim the additional deductions for the mortgage interest and taxes that go along with a new house in a high real-estate tax state such as Pennsylvania.

Could we potentially escape the AMT by putting the new house in my wife's name only and then filing our taxes separately? I make a substantial amount more than my wife, so the high amount of deductions due to the new house would not put her in striking distance of the AMT if she was to file separately.

I sure wish I could give you an answer, but I can't. You'd really need to figure everything both ways to know for sure.

I can tell you this: It's usually not advisable to shift deductions to a lower tax bracket because they're less valuable there. Less value is better than no value, of course, but you'd be shifting both the tax write-off (vulnerable in AMT land) and the mortgage write-off (safe).

Also, I can tell you that in the 30 years I've been writing about taxes, I've come across only a handful of cases where married couples who filed separately come out ahead. Joint is almost always best.

Sorry I can't be of more help. The AMT simply refuses to give up its secrets easily. Good luck.