Now that it is the first day of December, we must make sure that our year-end tax planning is in full gear. Over the next few weeks, I will post various items related to year-end tax planning that you need to review and deal with now.
First, many farmers assume that the alternative minimum tax (AMT) applies only to either (a) rich people, or (b) those with a lot of deductions, etc. This viewpoint can be very costly to our farmers.
For 2009, Congress had passed a patch to increase the AMT exemption up to around $70,000 for married couples. For 2010, it is scheduled to go back to its old exemption amount of about $45,000 for married couples. If this happens, it is projected that upwards of 26 million taxpayers would be subject to the AMT, including several thousand farmers.
You must review your year-end tax planning to make sure that the AMT does not bite you. If you live in a state with high income taxes and you normally prepay your state income taxes by year-end, you may want to consider not paying until 2011.
Also, if you buy equipment, taking Section 179 expense on these purchases does reduce your AMT burden.
All in all, you need to review your year-end tax planning with your advisor to make sure that the AMT is minimized as much as possible.