The alternative minimum Tax (AMT for brief) was originally launched in 1969 as the minimum Tax, the sole purpose of which was to ensnare high income taxpayers into paying at the bare minimal some revenue taxes, simply mainly because some of persons taxpayers used to pay little or no taxes by way of special tax benefits. But with tax bracket creep working its magic (at lowest for the U.S. government) and the tax not being indexed for inflation, this tax has now corralled more and more middle class taxpayers into its net, people who traditionally do not have high revenues to start with or do not claim a lot of unique tax benefits, if at all.
The AMT is considered as a parallel tax by many since taxes now have to be calculated in two different manners, the regular way and the AMT way. The big difference between the two taxes is tallied on IRS form 6251 and taxpayers have to pay the increased of the regular tax or the minimal tax. Proposals to repeal or reform the Alternative Minimum Tax have languished in Congress for years. In light of the present U.S. deepening debt difficulties and President Obama having given the IRS the green light to leave no stone unturned to gather every single single last dollar of revenue, reform still seems to be years away. It surely looks like the AMT is here to stay for the foreseeable future. Thus, most taxpayers may as well be resigned to ever more hard work when it is tax season. Once the AMT tax is mentioned in the 1040 a Instruction Booklet, you know how far reaching it has become.
unfortunately, there is no good way of knowing if we have to worry about being grabbed by the AMT, which is probably the biggest problem. Some goods that can trigger the tax are items most of us are familiar with when calculating regular taxes. Any of the following can land you into Alternative Minimum Tax territory :
* personalized exemptions
* Standard deductions
* State and local taxes
* Health expenses
* Interest on second house loans or home equity mortgages
* Miscellaneous itemized deductions
* Long term capital gains
* Tax exempt interest
* Tax shelters
* Incentive inventory options
* Accelerated depreciation * Passive income or losses
* Net operating loss deductions
* foreign tax credits
* investment expenses
And the list goes on. Can you, as an individual or business owner think of any other item not listed above ?
Perhaps acting as a counterbalance to its awesome complexity, the AMT tax only has two rates, 26% on the first $175,000 of taxable earnings and 28% on the remainder.
The 2010 Tax aid Act also legislates the following exemption amounts, happily meaning that these amounts are not subject to the AMT. However, numerous dual earnings families will still fall through the cracks. Here goes :
* $48,450 for singles and heads of households
* $74,450 for married particular persons filing jointly and qualifying widows or widowers
* $37,225 for married partners filing separately
However, the Internal Revenue Service has an on the net service that can help taxpayers figure out if they will be subject to the AMT called AMT assistance for individuals.
If it is of any consolation, if you had paid AMT taxes due to certain
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