The Alternative Minimum
The AMT is an alternative, separate tax calculation
created in 1969 to make sure the wealthiest Americans
paid a fair amount of taxes. Unfortunately, the
law of unintended consequences occurred as with
many of the governments solutions and the tax
could now reach as many as 23 million Americans.
you may ask is a tax designed to hit the wealthiest
affecting the middle class? Elements of the AMT
have not been adjusted for inflation while the
regular tax has, this means that if an individuals
income tax just keeps up with the annual rate
of inflation his or her income tax would remain
constant in real terms while the potential AMT
liability would continue to increase.
Items that could trigger AMT:
the more claimed the greater the chance of AMT.
State and Local Taxes
on 2nd Mortgage
Itemized Deductions (2% rule)
Stock Options (ISO's)
Term Capital Gains
Tax-exempt interest bonds (muni's)
personal exemption for Married and Filing Jointly
exemption is $45,000 unless Congress passes
the AMT relief legislation.
means that for every $1 over $150,000 in income
your AMT exemption is lowered by $.25
you have a high salary or large capital gains
you could get hit. Over $328,000 and you have
exhausted your AMT Exemption completely.
should you do?:
AMT is a tough tax to estimate. If you think you
are in jeopardy of hitting the AMT talk with your
tax professional about the AMT preference items
you will also find a link to the AMT estimator
tool on the IRS website.