The+Individual+Alternative+Minimum+Tax

The+Individual+Alternative+Minimum+Tax - The Individual...

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Click to edit Master subtitle style 2/10/11 The Individual Alternative Minimum Tax Rosanne Altshuler Economics of Taxation Fall 2010
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2/10/11 Background 1966: 155 high-income taxpayers paid no income tax 1969: creation of a minimum tax designed to ensure high income filers did not exploit tax laws to reduce or eliminate their federal income tax liability 2009: AMT will affect about $4 million taxpayers (about 1 in 20) and generate
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2/10/11 Determination of AMT Liability Add preferences and adjustments to taxable income Subtract AMT exemption Calculate tax using AMT rate schedule and rules If more than regular tax, pay the difference as AMT (Many complexities left out of this simplified explanation.)
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2/10/11 AMT Exemptions and Schedule AMT exemption currently $70,950 for couples, $46,700 for singles In 2010, exemption drops to $45,000/$33,750 Exemption phases out at higher incomes, creating high implicit tax rates Statutory rates = 26% and 28%, but exemption phaseout creates phantom rates of 32.5% and 35% Not indexed for inflation
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2/10/11 AMT Preference Items State and local tax deductions (51% of total) Personal Exemptions (22%) Miscellaneous deductions above the 2% floor (20%) Net Operating Losses (12%)
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The+Individual+Alternative+Minimum+Tax - The Individual...

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