Lowering taxable income?

I am subject to the ATM and want to lower my taxable income to avoid it. I am very very new to the working world, so forgive my ignorance. I max my 401k and have minimal taxed investments in mutual funds, but otherwise, I have no assets. I have no plan to buy an apartment or house for 3 years. Any other ways to lower my tax bill or drop a bracket (or avoid the ATM) other than real estate purchases? Thanks! I greatly appreciate your feedback.

Correction - AMT (i.e., Alternative Minimum Tax). Not ATM.

Hi. Go into business. You really need to lower your income. Right now, you are giving all of your wages to the government by October, November or December. The first 5,000,000 is NOT subject to corporate alternative minimum tax. If the taxpayer has a business, he is not subject to the 2% of AGI limitation with regard to the business portion of your expenses. This deduction is largely unused. So if a taxpayer has a business, he has a vast resource of potential deductions. The most affordable one, so long as he has the means to start a business and keep the business afloat, would be to switch his health insurance to the policyholder being the business name. Then the business owner pays the premiums out of his business checking account. It's called the Self-Employed Health Insurance Deduction. You cannot use the Form 1040A. You cannot deduct it on the Schedule C. There are a few
restrictions. The business owner uses the 1040. It's Line 29. The self-employed health insurance deduction is not subject to the 7.5% AGI subtraction; 10% when figuring AMT liability. With the high and rising cost of health insurance, this is the only feasible way to pay the premiums. In 2004, the premiums became 100% deductible on the Schedule C. Only 10 or 12 years ago, the premiums were only 40% deductible. This is the only way to be able to afford family health insurance in America, but the deduction is unused,
because it is being overlooked.

You may want to consider investing in real estate. I kept the books for a lady and I couldn't believe it: her bank prorated the payments in to business and personal use when she refinanced. Saving statements, receipts, documents and keeping a diary of all of your business related expenses cannot be overemphasized. So you can deduct some on the Schedule C. This can be invaluable if you do not wish to "bunch up" paying your real estate, property taxes and hazard insurance in to a year that you feel you will not owe AMT, so that you can get the deductions {subject to phaseout}.

For capital gains, sell stocks in "phases", not all at once. Roll over in to SSBIC companies whenever possible. This is definitely something to look in to.

Contribute to a conventional IRA (if your income doesn't exceed the deductible ceiling), invest in muni bonds or bond funds (most of these are exempt from ATM but you need to research first to make sure).

ATM is Automatic Teller Machine. Most of us don't complain about them.

There really isn't a whole lot you can do.

Just a few ways that you are able to control:
1. (Tax-Free Funds): As one of the other people indicated, interest income generated by most state and local municipal bonds is generally exempt from federal income and/or alternative minimum taxes1. But, you do have to be careful -- if these bonds were used to pay for "private activities" such as housing projects, hospitals, or certain industrial parks, the interest is fully taxable for taxpayers subject to the AMT.

2. (Predict the future): Let's say you discover that you may be subject to the AMT next year. You may want to consider paying your local and state tax bills before the end of this year. You'll gain a deduction that may otherwise be lost next year. You could also group together other expenses 鈥?such as investment and tax preparation fees 鈥?and pay them this year. If subject to the AMT, you may not be able to deduct those payments the next year.

3. (Time Your Capital Gains): Under the AMT, a portion of your income may be exempt from tax. For the 2007 tax year, the exemption amount for married taxpayers filing jointly is $66,250, but the exemption is subject to phaseout based on income. While capital gains generally qualify for the same lower rates under the AMT as under the regular tax rules, a capital gain may cause you to lose part or all of your AMT exemption.

Hope that helps.