How the Amt Affect Long-Term Capital Gain Rates

Abstract

Common wisdom suggests that in planning for the tax bill for a long term capital gain using a flat 15% rate for the estimated federal tax liability is sufficient. The authors examine and illustrate that the interaction between the alternative minimum tax (AMT), the level of ordinary income, and the magnitude of the long term capital gain can often result in effective rates above 15%. The effects of filing status on the effective rates are also examined in the article. Guidance for estimating the true effective federal income tax rate on a long term capital gain is provided.

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