Due to the timing of my husband's signing and retention bonuses, we will almost certainly have to pay the AMT. Next year, our income will probably drop back under the threshold, and it most likely remain there going forward. I'm trying to structure our finances to minimize the overall taxes paid over this two-year period. I have some thoughts, but would welcome corrections and other suggestions.
Current ideas include:
1 - Adjust state taxes withholding to slightly under-withhold this year, so that we don't get a state tax refund. State taxes are deductible in the year paid, I believe, so we want to pay more of our state taxes next year (when they will be deductible) than this year (when they won't be). I believe that we can slightly underwithhold without triggering a penalty.
2 - Make all our charitable contributions for the two-year period in 2016, since they are deductible at the marginal rate, which is higher than the AMT rate.
3 - We are thinking of getting a solar system. In our state, that gets us a significant state tax credit. My thinking is that we should get the system this year (and adjust state withholding to underwithhold even after that credit). Again, the goal would be to minimize state taxes paid in the AMT year.
Any other thoughts? Our mortgage requires property tax to be paid through escrow, so we can't adjust that at all. We don't usually qualify for other substantial deductions (under the threshold for medical and home office, and we do an FSA for dependent care).