AMT and Deduction of Mortgage and RE Taxes

Mortgage interest (on the part of the mortgage than 1MM) - yes. RE Taxes - no.

(on the part of the mortgage less than 1MM)

you gotta love the amt, we have to pay taxes on money we don't even have because we already paid other taxes with it.

the AMT is the most damaging tax to the east coast middle class who pay ridiculous real estate and state taxes ... the fing flat income rate that it is based on has not changed since the 1960's .. .unvelievable. But, it generates so much $$$ for the feds that no one will cut it. sickening.

I am a financial planner and many of my clients pay it. Very hard for people who are aleady hit with a very high cost of living. Not to depress you but...you also can not deduct state and local taxes,

nhaines, for the best advice you should consult your own tax accountant. everyone's situation is different

As I understand it, AMT really hurts people in NYC because the city taxes are so high. City/State taxes are deductible on your Federal income taxes. RE taxes are also deductible. AMT kicks in when your deductions are too high. It depends on your personal situation, but RE are not deductible for me due to AMT.

thanks everyone for comments. yes I know I need to talk to accountant to review but wanted to have a sense of basics.

The AMT rate is high enough and applies to a larger AGI such that it could wipe out any savings you have on allowable deductions, effectively rendering allowable deductions to be worthless.
We went from getting a large refund (with large mortgage) with 9 dependents or whatever they are called on w4 to owing 5 figure tax sum when AMT rate went up a couple of years ago. We zeroed out dependents and still owe money under AMT so our mortgage interest deduction that is alllowable is meaningless and worthless

With respect to the last comment, could someone please clarify. I though that basically mortgage inmterest deduction (up to $1MM) was inviolate -- that is you can always get that deduction in full regardless of AMT. However, AMT could cause you to lose part or all of your r.e. tax deduction (as well as other deductions) thatyou would otherwise be entitled to take. Is that correct?

#11, you are correct. See http://www.fairmark.com/amt/topten.htm

"The AMT allows a deduction for interest on mortgage borrowings used to buy, build or improve your home. If you borrowed against your home for some other purpose, the interest deduction isn't allowed under the alternative minimum tax."

#10 here.
The point is that the AMT rate is a flat rate applied to the AGI that results from the lesser number of deductions allowed under AMT. Thus your AGI is lower than it would be had you not been able to deduct mortgage interest but the AMT flat rate is high enough to effectively nullify the benefit of the deduction.

Is this any clearer?
The basic gist is that you can deduct to calculate but the amount you will owe as a result is so high (if you earn enough) that you will still owe a high tax amount. I.e. the refund you used to get is no more.