Jul. 28th, 2005 @ 12:18 pm
The horror stories come from having to pay AMT. Basically it's a flat tax on unrealized gains from stock options. So if you exercise the option and hold, you'll have to pay tax on the expected profit. By exercising and immediately selling the option, you'll have zero AMT, and no horror story.
...I've been dealing with this obscene AMT for 3 years now. Sigh.
The Alternative Minimum Tax (AMT) is much more than that. It was intended to cover some 155 high net worth individuals who, in 1965, paid no income tax at all by contorting themselves according to every tax law passed by the Congress. This was deemed unacceptable, but rather than repealing all the tax incentives and credits that caused the problem in the first place, Congress passed the AMT instead, which is 26% ("How dare they follow our rules! Whack them with a new tax!").
Of course, none of the triggers are indexed to inflation, so it now catches millions
of tax payers now. It needs to be entirely repealed, and if the Congress is unhappy with the possibility that some people might pay no taxes on their incomes, it's time for them to repeal various tax credits and incentives.
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