How Do Capital Gains Affect AMT?
One of the most favorable tax provisions for long-term investors is the lower tax rate on capital gains for assets held for longer than a year. If you sell an investment you've owned long enough to qualify for these long-term capital gains rates, you'll pay a maximum of 20% on your gain, and those in the 10% and 15% tax brackets get to enjoy tax-free long-term capital gains.
Yet the recent tax reform proposal from the White House has reminded investors that there's a second system of taxation that can make you pay more to the IRS. The alternative minimum tax, or AMT for short, was designed to ensure that tax breaks don't reduce anyone's tax liability below a certain critical point. Although the AMT does incorporate favorable capital gains rates, there are some other ways in which capital gains can affect what you'll pay in alternative minimum tax.
Image source: Getty Images.
Source: Fool.com