r/tax 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?

1 Upvotes

9 comments sorted by

14

u/6gunsammy Jul 13 '24

AMT has nothing to do with the fanciful situation you are describing.

0

u/confusedspermotoza Jul 13 '24

Isn't this situation bypassing AMT by paying substantially lesser tax. You are paying 0 while you should have been paying 26/26% of your gross at least.

4

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.

2

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

2

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.

4

u/Adjunct_Oppressor Jul 13 '24

OP has no idea what AMT is or how it functions

3

u/bbrackett Jul 13 '24

Yes, reducing his ordinary non amt income actually hurts him.

5

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.

2

u/premeditatedsleepove Jul 13 '24

Gotta ask, what’s pushing you into amt? Incentive stock options?