Everyone hates the Alternative Minimum Tax or AMT. The AMT requires that you calculate your tax bill under a different set of rules and deductions, compare that number to your regular tax, and pay the larger of the two. This decades-old measure was originally enacted to make sure the super-rich paid their fair share of taxes. However, over the years it began to hit taxpayers of modest means. As a result, the AMT has not been very popular in recent years and many have called for its repeal.
Last year, as tax reform was debated, Congress stopped short of doing away with the AMT but did succeed in taming the beast in a significant way. Two major changes were made as follows:
- The exemption amounts were raised from $ 84,500 to $ 109,400 for married taxpayers and from $ 54,300 to $ 70,300 for single filers.
- The phase-out range for these exemptions was increased significantly. Under prior law, you would start losing part of your exemption at income levels of $ 160,900 for marrieds and $120,700 for singles. Those numbers are now $ 1 million and $ 500,000, respectively. The result is that many more taxpayers get the benefit of the exemptions.
Because of these changes, the AMT is estimated to affect only about 200,000 tax filers in 2018 versus 5 million taxpayers who paid it under the old law. That’s a 96% drop! This will bring welcome relief to the average taxpayers who were getting hit with this tax year after year.
David K. Raye, CPA, P.C. 704-887-5298 www.davidrayecpa.com
*The information in this blog post is general in nature and not intended as specific advice. Please consult a tax advisor to see how this information applies to your specific situation.