Articles from The Mediator

Income Tax Headache: Another AMT Patch

Anyone who has ever paid Alternative Minimum Tax (AMT) on their Federal tax return knows what an insidious tax it is. AMT is a minimum tax you must pay — even if your actual income tax is lower. The idea 42 years ago, when AMT was first implemented, was to make sure that the very wealthy couldn’t avoid a minimum level of tax. Often AMT is difficult to plan for or see coming until it’s right there on your tax return.

I have noticed over the past 10 years that more clients now pay AMT, many of whom are hardly super-wealthy. This is because AMT is not indexed for inflation — so as income increases due to inflation, more people are ensnared by the AMT each year.

So Congress has once again enacted a ‘patch’, which is a temporary change to some of the AMT rules, to keep even more people from having to pay the tax. However, the patch expires at the end of 2011, and unless another patch is enacted, yet more will pay the unnerving AMT.

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