Should California Property Owners Prepay property taxes? It’s complicated.

Is prepaying your property taxes a good idea? And will the IRS even allow the deduction? With Jeffrey Levine, Blueprint Wealth Alliance CEO, and billionaire businessman Tilman Fertitta. The AMT – that is, the alternative minimum tax – is fast becoming the federal income tax most people pay. While the tax originally was intended to be a tax for the “rich,” more and more of the middle class (as well as, of course, many wealthy taxpayers) now find themselves AMT taxpayers.

Prepay property taxes? It’s complicated from CNBC.

What is the Alternative Tax Minimum Tax?

The Alternative Minimum Tax (AMT) is often described as a “shadow” or “parallel” tax to the regular federal income tax. The name, in fact, says it all; the AMT is an “alternative” way of calculating income tax. The IRS requires middle- and high-income taxpayers to run two sets of numbers when filing income taxes: the regular income tax calculations on Form 1040 and the AMT method on Form 6251. Whichever number is higher is the amount the taxpayer must pay. Unfortunately for a growing number of Americans, the AMT is the winner.

Why is that unfortunate? Because the AMT bill can be much higher than what is owed under regular tax law. What the AMT attempts to do is strip away special deductions and exemptions and start every taxpayer off on equal footing. Under the AMT, everybody starts with the same large exemption, which in 2011 is $48,850 for single taxpayers and $74,450 for married couples filing jointly. That means a married couple doesn’t owe a cent on the first $74,450 of its income. But any income that exceeds $74,450 is taxed at 26 percent. If the couple’s income exceeds the exemption by $175,000 or more, it is taxed at 28 percent.