Today TaxMama hears from Steve in Alaska who sends a very long question. To summarize, he says: “Using TurboTax, my standard deductions are higher than my itemized deductions. Yet, choosing the standard deduction, I OWE the IRS approximately $1,650. But if I itemize deductions, I get a REFUND from the IRS of about $450. Why does the smaller itemized deduction give me a lower tax bill (larger refund)? Is this primarily related to black-box inner-workings of the AMT?”
Hi Steve,
Unless you’re giving me backwards numbers, this could be a TurboTax programming error.
OR, and this could be an interesting glitch you stumbled on in the AMT system…there may actually BE a benefit from what you’re doing.
The AMT calculation takes into account the standard deduction. But when it comes to itemized deductions, certain deductions are not subject to the Alternative Minimum Tax
(Form 6251).
You just might have hit on an interesting way to cut your AMT taxes – to select itemized deductions when you have high charitable contributions and home mortgage interest arising from acquisition debt – but below the standard deduction.
Interesting. I’ll be testing your question out with my clients over the next couple of months and see if you’ve just hit on something. (It’s probably my usual lack of sleep this time of year. But, perhaps this is nothing more than an error.)
And perhaps I’ll throw this out to the Tax Pros to test, too. Thanks for asking!
And remember, you can find answers to all kinds of questions about tax oddities and other tax issues, free. Where? Where else? At TaxMama.com
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- IRS Form 6251 :: Alternative Minimum Tax
- IRS Schedule A & B :: Itemized Deductions
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