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One of the key provisions of the tax bill that the House could vote on as early as today deals with the alternative minimum tax, or AMT.
By now, most taxpayers know about this parallel tax system that disallows certain popular tax deductions and which ends up creating higher tax bills for affected folks.
Even more taxpayers could face the AMT in 2010 unless the tax bill and the AMT "patch" it includes are passed.
The patching, or temporary changes made to some of the AMT parameters, is a routine job for Congress. Unfortunately, lawmakers also routinely leave this piece of corrective tax legislation to the last minute.
The problem is that when the alternative minimum tax was created back in 1969, it wasn't indexed each year for inflation.
So over the last 41 years as wages have increased, the amounts that the AMT uses to determine who's rich enough to pay it have not. The key set of AMT numbers are the earnings exemptions. If you exceed these amounts, you might be subject to a bigger AMT bill.
If the tax cuts legislation now working its way across Capitol Hill is approved, the AMT exemptions for 2010 would be:
- $72,450 for married couples filing a joint return.
- $47,450 for filing as single or head of household filers.
- $36,225 for married taxpayers filing separate returns.
The bill also takes care of 2011 numbers so we don't have to wait until next December to figure out if we might owe AMT for that tax year. They are:
- $74,450 for married joint filers.
- $48,450 for single or head of household taxpayers.
- $37,225 for husbands and wives who file separate returns.
There is always talk about scrapping the alternative minimum tax altogether. We can hope, but for now at least we finally know what this and the next tax year holds in connection with the AMT.
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