The elections are around the corner, the year is rapidly drawing to a close, and Congress is on its fall "recess" without, once again, having done anything about the Alternative Minimum Tax "patch." The so-called "patch" is the adjustment that needs to be made to the AMT exemption amount to prevent 26 million new taxpayers from falling into the Alternative Minimum Trap this year, as well as to prevent each of the 4 million already stuck there from paying thousands more in AMT dollars. Many taxes are going up significantly come January 1 -both income taxes as well as payroll taxes - and the new moniker "Fiscal Cliff" has been adopted to describe the devastating effect this will have on the U.S. economy if it is allowed to happen.
As of January 1 of this year the AMT exemption reverted back to what it was 20 years ago. Through a series of successive and annual temporary "patches" over this 20-year period, the exemption has been indexed for inflation so as to keep the number of Alternative Minimum Tax payers relatively constant -currently approximately 4 million taxpayers. These patches generally have been for just one year at a time because the cost of doing them is so large -the current one-year estimate is $40 billion. Some day there may be a permanent fix, but it is unlikely that this will happen anytime soon.
The 2011 AMT exemption amount, itself the product of last year's patch, was $48,450 for single taxpayers and $74,450 for married couples filing jointly. What this exemption amount generally means is that a taxpayer's Alternative Minimum Taxable Income (AMTI) for 2011 had to be more than $48,450 higher ($74,450 for couples) than the taxpayer's Regular Tax taxable income before the AMT even would begin to apply.
For 2012, these exemption amounts revert back to $33,750 for single taxpayers and $45,000 for married couples filing jointly, and will stay there unless Congress acts to update them for inflation. The significant difference in these exemption amounts equates to 26 million new AMT payers.
Congress returns for its post-election lame duck session in early November, takes a long Thanksgiving break, and then returns for just a few more weeks before the final adjournment of the 112th Congress. The Congressional agenda is over-full, with too many things to do in addition to taxes to get them all done by year-end. In just in the tax area it has to deal with the expiration of the "Bush tax cuts," the expired estate tax, and dozens of other "tax extenders" -those miscellaneous provisions in the tax law that expired on December 31 of last year.
Stay tuned for developments on the patch -"conventional wisdom" is that Congress will get this done, but it is likely to be the normal mad scramble as this and all of the other legislative needs are addressed in this short post-election time period.
As of January 1 of this year the AMT exemption reverted back to what it was 20 years ago. Through a series of successive and annual temporary "patches" over this 20-year period, the exemption has been indexed for inflation so as to keep the number of Alternative Minimum Tax payers relatively constant -currently approximately 4 million taxpayers. These patches generally have been for just one year at a time because the cost of doing them is so large -the current one-year estimate is $40 billion. Some day there may be a permanent fix, but it is unlikely that this will happen anytime soon.
The 2011 AMT exemption amount, itself the product of last year's patch, was $48,450 for single taxpayers and $74,450 for married couples filing jointly. What this exemption amount generally means is that a taxpayer's Alternative Minimum Taxable Income (AMTI) for 2011 had to be more than $48,450 higher ($74,450 for couples) than the taxpayer's Regular Tax taxable income before the AMT even would begin to apply.
For 2012, these exemption amounts revert back to $33,750 for single taxpayers and $45,000 for married couples filing jointly, and will stay there unless Congress acts to update them for inflation. The significant difference in these exemption amounts equates to 26 million new AMT payers.
Congress returns for its post-election lame duck session in early November, takes a long Thanksgiving break, and then returns for just a few more weeks before the final adjournment of the 112th Congress. The Congressional agenda is over-full, with too many things to do in addition to taxes to get them all done by year-end. In just in the tax area it has to deal with the expiration of the "Bush tax cuts," the expired estate tax, and dozens of other "tax extenders" -those miscellaneous provisions in the tax law that expired on December 31 of last year.
Stay tuned for developments on the patch -"conventional wisdom" is that Congress will get this done, but it is likely to be the normal mad scramble as this and all of the other legislative needs are addressed in this short post-election time period.
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