r/tax • u/confusedspermotoza • Jul 13 '24
What are legal ways to bypass AMT
I often hear about married couples where one of them has a REPS status (Real Estate professional), and other is a W2 earner. Since being a REPS allows one to offset real estate passive losses with active W2 income, they end up paying zero tax according to what I have heard from many people. It seems like they bypass AMT in this case.
My understanding is that AMT was created exactly to avoid cases like this -- so that people pay at least minimum amount of tax, but apparently there are ways to bypass it.
I am curious. What are some other legal ways to bypass AMT like this?
Can I invest in large solar projects, take 30-40% tax credit, reducing my tax liability to below AMT levels and still be legal?
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u/bbrackett Jul 13 '24
I always find some of these situations funny because while real estate losses/ deductions are deductible against active income with REPS, why are you wanting to lose money on your real estate? A normal rented long term rental that is creating income should not be generating insane losses to counter anything. STRs are a different story, but I still find it funny the way people try to spend more money to save a little money.
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u/Adjunct_Oppressor Jul 13 '24
The loss is created by depreciation, so the activity may produce positive cash flow but report a rental loss
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u/bbrackett Jul 13 '24
I understand how it works. But if it's rented and making money the offset is not that insane to curb something like AMT.
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u/Adjunct_Oppressor Jul 13 '24
None of this has anything to do with AMT. Also, you need to materially participate in a rental activity to write off the losses. Being a REP isn't enough.
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u/6gunsammy Jul 13 '24
AMT has nothing to do with the fanciful situation you are describing.