But trying to avoid or minimize AMT exposure can be difficult. “The only way … is to have all ordinary income and very little investment income taxed at the preferential dividend and capital gains rates,” Schuster said. “If there are ways to control the flow of income, it may be possible to avoid or minimize the tax, but that’s often not practical.”
“The AMT might become problematic under the new tax law in more atypical situations, for instance when a client exercises incentive stock options in which the difference between the option price and the fair market value of the stock is significant, resulting in a large AMT adjustment,” Egmon said. “For this client, planning around the timing and amount of the ISO exercises would be prudent.
“Additionally, clients who pay the AMT who have more common AMT adjustment items – for example, property or state income taxes (now limited to a total of $10,000) or deductible medical expenses – should not only consider altering the timing of those payments among tax years where possible, but also evaluate the possibility of converting personal-use assets to business use where it makes business sense to do so,” Egmon said.