Who Pays the Alternative Minimum Tax?
Now, this convoluted parallel tax and credit formula kicks in for millions of taxpayers. What is the AMT, and who may be required to pay it?
Tax law is structured in such a way so that benefits and credits are extended to qualifying individuals. According to a 2009 IRS Tax Topic on the AMT, the goal of AMT is to ensure that anyone who benefits from these tax advantages pays at least a minimum amount of tax.
The IRS doesn't want an elephant sitting on the other end of their teeter-totter. In other words, the AMT tries to even things out across the board from a tax standpoint.
One of the main challenges that Congress faces with the AMT is that it has never really been indexed to account for inflation. Because of this, there has been multiple patch-work fixes applied through year-end tax law clarifications so that millions of middle income Americans are not unfairly caught in the wide net of AMT.
AMT exemption amounts have been steadily rising each tax year in order to keep the tax away from the average taxpayer. Exemption amounts represent a minimum floor where the AMT may kick in. Household income under these amounts bypasses AMT.
However, unless Congress passes new legislation, the AMT exemption amounts for 2010 are scheduled to be lower than they were for 2009.
Current 2010 exemption amounts stand at:
$33,750 for single and head of household filers
$45,000 for married people filing jointly and for qualifying widows or widowers
$22,500 for married people filing separately
Because of the numerous variables, AMT is a complicated formula to determine. However, the IRS has an AMT Assistant set up on their web site.
The AMT Assistant is user friendly and is designed to help you determine if you might be subject to the alternative minimum tax. Based on answers given to specific questions, the application will tell you that either you do not owe the AMT, or that you must go further and complete Form 6251 to find out if you owe the AMT.
For more information on AMT, visit irs.gov and search the acronym AMT.
Published by James Skye - Featured Contributor in Business & Finance
As a 15-year IRS employee with a strong freelance background, my education and experience affords me the opportunity to contribute articles relating to personal finances and taxes. I also enjoy writing relig... View profile
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