Purchase an Immediate Annuity

• If you were lucky enough to receive a windfall, pushing you into AMT territory for the year, consider buying an immediate annuity. This will spread the income out over many years, potentially avoiding or limiting your exposure to the alternative minimum tax. This doesn't eliminate income tax, but the balance of the annuity accumulates tax-deferred. This can be a useful strategy if you believe you will be in a lower income tax bracket in future years.
  
  

Purchase Municipal Bonds

• Municipal bonds generate tax-free interest and can help you manage your exposure to the alternative minimum tax. However, not just any municipal bond or bond fund will do. Certain municipal bonds, called "private activity bonds" are not tax-free to anyone subject to alternative minimum tax rules.
  
  

Defer Tax-Deductible Expenditures to a Future Year

• If you anticipate falling under alternative minimum tax provisions this year but not next year, consider making any expenditures that would qualify as miscellaneous itemized deductions after Jan. 1 of the next year. For example, you can delay payment of tax preparation fees or investment planning fees until after the first of the year, because these deductions would be disallowed if you make them this year, under AMT rules.
  
  

Exercise Options

• If you have both qualified incentive stock options and nonqualified stock options, you may be able to take the opportunity to make a tax-free exercise of some your qualified options. Rules concerning options exercises and the AMT are complex. Be sure to consult a qualified tax expert for advice on your particular situation.