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AMT: Are You the Next Unsuspecting Victim?
By Heather Cozby & Christine Bruno
More and more individuals are becoming subject to the Federal alternative minimum tax (AMT), and unless legislation is passed soon, many more will be paying an extra hefty tax bill next April.
What is it? AMT is a complicated tax calculation originally designed to target high-income people who could avoid paying their fair share of federal income tax by taking advantage of various tax breaks predominately available for the wealthy.
The Reality. Over the years, the tax breaks AMT was designed to mitigate are all but history. Therefore, AMT is now affecting taxpayers in the middle income brackets instead of the truly wealthy. The primary source of the problem is that the AMT exemption amount does not include an inflation adjustment, and the exemption amount in 2007 will be substantially less than it was in 2006. With the AMT exemption decreasing, more first time AMT taxpayers will be surprised with additional thousands of dollars due in April of 2008.
Is there any Hope? Congress has enacted legislation the past few years to temporarily increase the AMT exemption amount and allow personal credits against AMT. Thus far, Congress has yet to pass laws for the 2007 tax year.
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