Advice on computing deductions for the AMT

Since more and more individuals, and especially high-net-worth investors, incur the alternative minimum tax each year, I would think you should mention that miscellaneous itemized deductions aren't deductible in computing it.

Since more and more individuals, and especially high-net-worth investors, incur the alternative minimum tax each year, I would think you should mention that miscellaneous itemized deductions aren’t deductible in computing it.

Many financial advisers seem to miss this point, especially as it relates to evaluating separately managed accounts, in which management fees represent a miscellaneous itemized deduction; mutual funds, in which management fees directly reduce otherwise taxable dividends and interest with any excess reducing net asset value and the eventual capital gains on the sale; and exchange traded funds, in which management fees reduce NAV and the eventual capital gains on the sale.

In the case of an SMA, the management fees represent miscellaneous itemized deductions that may be limited by the 2% of the adjusted-gross-income floor for regular tax purposes and are completely non-deductible for AMT purposes.

This treatment is much less favorable than the treatment of management fees for mutual funds or ETFs.

As such, SMAs aren’t nearly as tax-efficient as suggested by many.

When it comes to the deductibility of management fees, they are the least-tax-efficient vehicle.

Kevin P. Ellis
President
Kyle Financial Services Inc.
Milwaukee

Debt settlement can help young people

I appreciated the Just Thinking column “Your clients’ kids and their credit” in the Sept. 1 issue, about credit cards for college students.

I find it alarming that incoming freshmen at one major university are automatically provided a line of credit via their student identification cards.

Unfortunately, in today’s society, credit cards are given without much discretion and are used without much forethought or planning.

A lack of proper education on handling personal finances means students and/or recent graduates often find themselves in serious trouble with their debt.

While all options should be considered, debt settlement can be a good option for young adults in this predicament with a fitting financial profile, including those who are in over their heads in terms of credit card debt.

I would like to see your publication shed light on debt settlement and other debt relief options, especially as they pertain to young people who are trying to avoid bankruptcy and a dire financial future.

Chris Kesterson
Chief executive
Debt Settlement America
Dallas
Executive board member
The Association of Settlement Cos.
Madison, Wis.

Credit cards not ‘vital’ for college students

The Institute of Consumer Financial Education takes exception to some of your comments in the Sept. 1 issue’s Just Thinking column, “Your clients’ kids and their credit.”

Specifically, we disagree with the assertion: “A credit card used correctly, of course, is a vital financial tool for college students.”

The institute contends that it isn’t a vital tool, especially in the hands of an individual who has yet to develop financial self-discipline, regardless of age.

Paul Richard
Executive director
Institute of Consumer Financial Education
San Diego