Practice Quiz

Financial Planner

Category - Tax Planning

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Which of the following can be an effective tax planning opportunity for individuals who may be subject to the alternative minimum tax?
  1. Always deduct state income tax instead of state sales tax
  2. Increase investments in private activity tax-exempt bonds
  3. Accelerate income through IRA or pension distributions
  4. Pay off all home equity loans
Explanation
Answer: C - There are several planning strategies to avoid being subject to alternative minimum tax. You can deduct state sales tax (which is not an adjustment) rather than state income tax. Dispose of private activity tax-exempt bond investments. Pay off home equity loans where the borrowed money was not used to improve the residence. You can also accelerate income through IRA or pension distributions.
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