Alternative Minimum Tax Freeze… for now.
December 28th, 2007 by Grant in: TaxesWhile I was out of town visiting relatives for Christmas, President Bush signed a bill freezing the alternative minimum tax (AMT) for one year.
This will provide relief to more than 20 million taxpayers that would have faced the AMT this year alone! Last year 4 million paid the AMT, and this year it was projected that 25 million people would be held to the fire. To put it in the most basic terms, the AMT would cost you an extra $2,000 if you were subjected to it. Yeah, that would’ve stung a bit.
Evidently, the bill was passed by Congress just before the holiday recess, and the President signed it right away.
AMT FOR DUMMIES
The alternative minimum tax (or AMT) is an extra tax you might pay on top of your regular income tax. Dreamed up in 1969, the premise behind the idea was to prevent people with very high incomes from using special tax benefits to pay little or no tax. But for various reasons the AMT reaches more people each year, including some people who don’t have very high income and some people who don’t have lots of special tax benefits.
The AMT provides an alternative set of rules for calculating your income tax, and in effect, these rules determine the minimum amount of tax that someone with your income should be required to pay. If you’re already paying at least that much because of the “regular” income tax, you don’t have to pay AMT. But if your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.
There is a lot more to it, of course, and if you want to read more about it, check out a Corner Office post from last year about the AMT. However, because Bush froze the AMT for the year, you don’t have to worry about it at all. Let’s just hope Congress can fix the AMT permanently… Since it’s an election year, I’m not holding my breath.
I’m already looking forward to comparing this years tax return to last years return in which I ended up forking out an extra $600 due to the AMT!
Tags: Alternative Minimum Tax | AMT | Taxes
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December 29th, 2007 at 11:47 am
It’s about time. Now like you said, they just need to make it permanent!
December 29th, 2007 at 12:05 pm
I agree, they need to get rid of the AMT, but I think they also need to cflose a lot of other loop holes as well. Taxes are a good thing in my opinion, they keep our military strong, our schools top notch, and our interstates moving. Not to mention the mail must get through!
The real problem I have with our tax system is that there is minimal oversight to tell me where my taxes are going. I just want to be assured that my federal dollars aren’t going to fund some bogus project.
Good blog, I’ll add you to my list!
January 8th, 2008 at 12:48 pm
You all aren’t understanding the situation I think. It is no longer as simple as getting rid of it or making things permanent. The AMT has become a vital source of revenue. The government can’t merely get rid of it. That is what the Reps want. They merely want to eliminate it however that will throw the government into a hole they can’t manage.
The Dems want to eliminate it and replace it with new taxes. Both sides are equally as moronic. This is a problem much larger than most people know or understand. Here is how I wrote about it…
http://theeprovocateur.blogspot.com/2007/12/amt-study-in-opportunism-cynicism-and.html
January 8th, 2008 at 8:21 pm
Mike, if what you say is true and the AMT has “become a vital source of revenue”, then there is nothing “alternative” about it.
I’m all for taxes. I have no problem paying taxes, as I see them as a vital part of keeping our economy going. However, when you have an arbitrary increase in taxes based on an arbitrary level of income, you can’t expect to spread the burden across the entire tax paying community equally.
I don’t care if you’re republican or democrat, the fact is the AMT is broken logic and needs to be heavily modified or extinguished all together and redrafted as something else.
Polish it up however you want, but at the end of the day, it’s still the same stinky policy.
-Grant