AMT Tax and Million Dollar Mortgages

Well if you qualify for that big of a mortgage, you're probably making enough to trigger AMT somehow...

That CANNOT be correct

Its true! Only the first $1M is deductable under AMT.

only first $1mm is deductable. Has nothing to do with AMT or condo or NYC.

#5 is right. nothing to do with AMT. You can do an additional $100,000 of home equity loan on top of that as well. The thing you CAN'T deduct when in AMT is real estate tax. That is the real kick in the can.
#2 is not correct. if you make well into the 7 figures, you will most likely NOT be in AMT unless you take every deduction under the sun.

so if you have a mortgage for 1.1 million, is none of it deductible or just the last 100,000?

just the last $100,000

#6, are you telling me you know ppl making 7 figures and not in AMT? How do you get around it?

#9, because their regular income tax is greater than AMT anyway

#7, the interest on the 1MM is deductible. the interest on anything above that is not

7 here, oh so you're still in AMT but the mortgage interest is deductible and the tax is not... is that what you mean?

#9, you pay the greater of AMT or the regular tax code. If your taxes under the regular tax code are greater than your taxes under AMT, you don't pay AMT.

#7, very simple. If you are subject to AMT, then RE taxes are not deductible. The mortgage interest on anything over 1MM rule apples to everyone, whether or not they are subject to AMT. Please consult your CPA if you have any further questions

7 here, hmmm I don't make near 7 digits but i'm married and hit AMT... help? Is marriage enough to trigger it?!?

#7, you are missing the significance of the 7 digits.
Because of the way AMT is structured, if you live in a place like NYC with high local taxes that you deduct because you itemize, take a bunch of other deductions, and you earn a certain amount, then you are likely to trip the AMT criteria.

Because AMT has neve been adjusted for inflation then more and more middle class nyers are getting hit by AMT. Some married couples making low 6 figures (say 125K) combined can find themselves paying AMT. The biggest hit is between 200K and 500K are thereabouts. Once you are above 500K or 600K then as was said before, the non AMT taxes you pay are higher than AMT taxes so AMT has not effect

#16, exactly. I am hit with AMT. As my CPA told me, to get out of the AMT range, you need to either make less money or more money. AMT generally hit between 200-500k. AMT was created for the wealthy class who were trying to avoid paying taxes by having a subsantial amount of deductibles. Because it was never indexed for inflation, it's now hitting the folks who earn btw 200-500k, hardly the upper, upper class it was intended for.

For the married person above, you should have your CPA determine if your taxes change if you file individually vs. jointly. If you or your spouse makes up the majority but not all of your income, it may make sense for you to file individually. Here's why: The lower salary is an 'add on' to the higher salary and is being taxed at the higher salary's range rate. Anyway, there's a lot more to it than this, but this may get you started.

I just posted above and want to add...real estate taxes are not deductible if you hit AMT. Again, remember AMT was created so that an upper, upper class could not deduct so much that they would fall into a very low tax bracket. AMT as it exists today really neads to be changed. It's not a bad idea; the fact that it hasn't been indexed for inflation however is completely, well, screwed up.

Thanks for the helpful advice, how the AMT works with the mortgage interest was quite confusing to me. Let's make the scenerio even more difficult. Does the $1m deductibility cap apply per mortgage or is it for all of your real estate mortgages combined? For example, if I own one house with a mortgage of $600k and another with a mortgage of $700k, can I deduct mortgage interest on one million's worth, or the full $1.3m from both houses?

I believe it's just 1m, but not sure. Any CPA's out there?

#19, 1MM total. Also you can't rent out the second home, if you want to deduct the interest on that one.

Does the amount of the mortgage deduction vary depending on marital status ? --

You mean if you file jointly or individually and based on who 'owns' the mortgage? Not sure, but great question!

I think I found out the answer from the IRS bulletin ...
Fully deductible interest. In most cases, you will be able to deduct all of your home mortgage interest. Whether it is all deductible depends on the date you took out the mortgage, the amount of the mortgage, and your use of its proceeds.

If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category.) If one or more of your mortgages does not fit into any of these categories, use Part II of this publication to figure the amount of interest you can deduct.

The three categories are as follows.
Mortgages you took out on or before October 13, 1987 (called grandfathered debt).

Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2006 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).

Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2006 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).