What is AMT?
AMT stands for the Alternative Minimum Tax. First introduced in 1969, the AMT was created to ensure that the wealthiest American households didn’t avoid paying income tax. Because the AMT has not been adjusted for inflation, the tax would affect middle-income tax filers if Congress does not fix it. Congress has increased or extended the AMT exemption three times since 2001. The last extension expired at the end of 2006.
How Many Taxpayers Will Be Affected By The AMT?
If a new AMT “patch” is not approved by Congress, the number of taxpayers subject to the AMT will jump from 4 million (in 2006) to 25 million in 2007. Taxpayers making $45,000 and above as a married couple in ’07, or $33,750 and above as a single filer, may be subject to the tax.
What’s being done to fix it?
Congress is late in creating a temporary AMT “patch” for tax year 2007. In November, the House of Representatives approved a one-year AMT “patch,” and the Senate passed a different version on Dec. 6. The two houses must reconcile their differences and win presidential approval for the bill to become law. We expect that will happen before Congress recesses on Dec. 21.
My advice: Contact your Congressman/woman to make sure the patch gets passed. Let’s not make your tax bill bigger.