AMT posts

The recession may be over, but many families are still feeling the effects. Unemployment is at a record 10.2% and wages are flat. The cost of gas is taking a bigger bite out of paychecks, and home foreclosures were one fifth of home sales in September.

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One of the many special provisions included in the bailout bill passed by U.S. lawmakers last week was a "fix" for 2008 for the Alternative Minimum Tax (AMT). This tax dates back to 1970, when a small number of high-income taxpayers were paying little to no tax because of all the deductions they had. AMT was created, and essentially it takes away some deductions for these taxpayers, uses a higher-than-normal tax rate, and results in additional tax due.

When the law was first enacted, only 19,000 taxpayers paid AMT. But the numbers in the law haven't been indexed for inflation, so without a yearly fix like lawmakers just made, a lot of middle class taxpayers could be caught by AMT and would owe a couple thousand dollars in extra income taxes.

The bailout bill specifies that the AMT exemption for 2008 will be increased around $46,000 for single taxpayers, and almost $70,000 for those filing joint. That increase means fewer Americans are subject to AMT, essentially protecting the middle class for another year.

If you're one of the millions affected by the Alternative Minimum Tax (AMT) temporary fix approved by the House of Representatives last week, you may have to wait to get your refund.

The fix is good for taxpayers, but bad for the Internal Revenue Service. Any form affected by the change won't be ready until February. So for the 3 or 4 million people who usually file in January, they may not get their refunds so early.

About 20 million taxpayers were spared from being hit with the Alternative Minimum Tax (AMT), thanks to a bill finally passed by the House of Representatives.

The AMT is a provision in the tax law which ensures that taxpayers with "high" income and a lot of deductions pay at least a minimum amount of taxes. But the rules were written back 1969, when the definition of "high" income was a bit different than it is today.

According to the New York Times, $150,000 in income in 1969 would be equivalent to $850,000 in today's dollars. Clearly, what was considered wealthy in 1969 is quite different by today's standards.

The tax law hasn't kept pace with inflation, and this year couples with income of $45,000 would have been affected by AMT. This new bill ups that figure to $66,250 for married taxpayers. It's estimated that this development will keep a married couple from paying an additional $4,000 to $5,000 in tax for the 2007 tax year.

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As the year-end draws near, lawmakers still can't agree on potential changes to the tax code. The current issue is the Alternative Minimum Tax, AMT for short. The AMT was enacted nearly 40 years ago, and was intended to make sure that high-income taxpayers with lots of deductions still paid a minimum level of income taxes.

The problem is that the tax code hasn't kept up with inflation, and what was once considered "high income" is now applicable to some taxpayers in today's middle class.

Republicans want to change the AMT rules so they apply to higher income earners. Democrats are unwilling to change the rules unless they can collect those taxes elsewhere. Some say the "cost" of changing the AMT rules will be a $50 billion decrease in tax collections each year.