Reply to Apparently no reason to switch my mutual funds to ETFs

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[quote=Anonymous][quote=Anonymous]in general. In taxable accounts you will pay capital gains which 15%-20% typically.  [/quote]

Capital gains taxes are effectively higher than this if you are subject to the AMT and you are at the point on the AMT where you deduction is phasing out. Every dollar gained in capital gains is treated as additional income from the AMT as your deductions phase out. Therefore, any capital gains leads to a faster phase-out of your deduction and what is essentially an additional tax on the capital gains from the deduction phase out. Qualified dividends have the same effect on your AMT tax.

I was a math major in college and it took me hours of playing with Turbo Tax and reading documents on the Internet last year to understand why our tax rate on capital gains and qualified dividends was so high. I'm one of those (apparently) rare people who think that my husband and I are fortunate to earn approximately $300,000 between us (split fairly evenly) and we should pay significant taxes, but I do not like the fact that our current tax system is so complicated. We should all be able to understand what effect a financial action will have on our taxes and right now that is almost impossible for most people. [/quote]

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