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A small business blog featuring tips to help entrepreneurs succeed in the small business world. Topics include family business, human resources, marketing, money, networking, operations, ownership, startup, taxes and technology.
Alternative Minimum Tax
This year, it’s estimated that millions of Americans will pay the Alternative Minimum Tax, also known as AMT. The AMT requires some people to pay more than regular income tax.
Congress enacted the AMT in 1969 following testimony by the Secretary of the Treasury that 155 people with adjusted gross income above $200,000 had paid zero federal income tax on their 1967 tax returns. In inflation-adjusted terms, those 1967 incomes would be roughly $1.17 million in today’s dollars. Source: TaxFoundation.org
11 things that may cause an AMT liability:
Excessive Exemptions
Standard Deductions
State and Local Taxes
Interest on Second Mortgage
Medical Expenses
Miscellaneous Itemized Deductions
Various Tax Credits
Incentive Stock Options
Long-Term Capital Gains
Tax-Exempt Interest
Tax Shelters
Read more about these AMT liability factors
A major flaw in the AMT:
The Alternative Minimum Tax is NOT adjusted for inflation. This means that with each year that passes, more and more people will be affected by this double taxation. This includes people who were not originally targeted for this tax — middle and upper-middle income families.
If left unchanged, the AMT is estimated to penalize nearly 15 percent of taxpayers by 2010–some 12 million Americans in total.
Recommended Reading:
IRS.gov – AMT Assistant
Fairmark.com – Alternative Minimum Tax Guide
Smartmoney.com – The Alternative Minimum Tax
TurboTax.com – Alternative Minimum Tax FAQ
Image Source: National Center for Policy Analysis
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