Mar 12, 2012 Article #85 Author: Peter S. Muffoletto, C.P.A.
The Alternative Minimum Tax (AMT) was the misbegotten attempt on the part of Congress to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax, in other words, the flat tax for the so called wealthy.
Somehow through the misguided attempt they completely missed those that they targeted and aimed instead at many unintended taxpayers who now have to deal with this monstrousously complex set of rules few even in the tax community fully understand.
The AMT provides an alternative set of rules for calculating a minimum tax for the so called wealthy.
In general, the AMT rules determine a minimum amount of tax that should be required for those socially unacceptable taxpayers deemed the wealthy, and who are actually not, that have a number of defined tax preferences, or loopholes as some call those deductions that were originally intended to stimulate the economy, that others may not be able to utilize, resulting in specifically politically stratified oriented taxation or penalty for those that invest in America.
Should the regular income tax fall below this minimum there is a complex recalculation based upon disallowing those “loopholes” including some extravagant deductions such as home mortgage interest, charitable donations, and numerous other “socially unacceptable” deductions resulting in an alternative minimum tax (AMT).
Tax laws provide specific tax benefits for certain kinds of income and allow special deductions and credits for certain expenses sometimes resulting in no or little tax if a taxpayer utilized those advantages by investing in the American economy. Congress created the AMT in 1969, targeting higher-income taxpayers, the so called wealthy (remember the law was enacted in 1969 and Congress has never truly adjusted the AMT for inflation – maybe they aren’t being truthful with us as to their intentions).
Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are being ensnared into the AMT.
The AMT exemption amounts, that amount that is allowed as total deductions in lieu of your total itemized deductions should those amounts exceed the following are set by Congress for each filing status. What this means is that if your total itemized deductions are in excess of the following amounts, you lose all of any amount above these amounts set by your favorite group in Washington. These amounts are in addition to the other complex rules that relate to the percentage loss of medical deductions, what is termed as excess mortgage interest deductions, and the limitations on business expenses. Yes, it’s complex.
For tax year 2011, Congress raised the AMT exemption amounts to the following levels
$74,450 for a married couple filing a joint return and qualifying widows and widowers;
$48,450 for singles and heads of household;
$37,225 for a married person filing separately.
The minimum AMT exemption amount for a child whose unearned income is taxed at the parents' tax rate has increased to $6,800 for 2011.
Obviously based upon the exemption amounts Congress somehow missed the their target of the extremely wealthy and included almost everyone else, and those that live in California, New York, Chicago, and other higher income locales.
When Congress talks about the wealthy, they mean you, not necessarily the other guy, and probably him too!
Remember to vote in November after you endure the pain of April 15!
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