The Alternative Minimum Tax (AMT), put simply, is the difference between regular income tax on your 1040 and the amount that the federal government wants you to pay. It turns out that the amount the feds want you to pay is never less than your regular income tax.
The AMT, which has been around since 1969 but evolved into its present form in 1982, is a key revenue generator for the Internal Revenue Service geared to extract money from middle and high-income taxpayers.
Here are the AMT basics...
- This tax currently applies to income over $48,450 for individuals and $74,450 for couples.
- It creates more revenue for the government by limiting or eliminating taxpayer itemized deductions such as state and local income taxes, real estate taxes, personal property taxes and certain miscellaneous items.
The government has "patched" the AMT in recent years to lessen its effect on middle income earners. However, a new "fix" needs to happen by January 1, or the AMT reach will broaden once again, effectively increasing taxes on citizens already snared by it.Our leaders in Washington say they want to raise taxes on high-income earners, lower taxes on the middle class and close loopholes for the wealthy. Those goals have already been accomplished on the wealthy through the AMT and a new 3.8% Medicare tax on gains and dividends beginning in 2013. But taxes will not be lowered on middle-income earners if the AMT isn't fixed in the next three weeks.
The solution? Tell Washington to fix the AMT and get a grip on spending before the pigs come to the trough for more money from taxpayers.