Speaking of AMT

[Black Bart]

Anybody know if the annual "fix" is in the works now or if there, in fact, IS a plan to do so? I"m always thinkin' that it must be very tempting for politicos NOT to because it would be such a huge money-maker and they're desperately seeking cash now.

[erchess]

My Guess

is that this will wait until after the election because I can't think how the President or congressional dems gain from doing it before. Any gains among people who think the AMT is a bad idea or should at least be inflation indexed automatically (one of which I am) would be at least offset in losses among "the base". I've got to admit I don't understand why the Republicans don't put something forward so they can talk about how it got shot down.

I do think another fix is inevitable because the middle class would never vote for another Dem for 20 years if none happened.

I hope this isn't too political. I am trying to talk about the realities and how they affect us and made only brief mention of what I think SHOULD happen and then only because I think most here agree with me.

[appelman]

The Taxpayer Advocate has inveighed...

The Taxpayer Advocate has inveighed against the AMT for years, to little avail. As she rather sarcastically noted in one of her reports to Congress, it is especially designed to penalize people with large families, big medical bills, or who have the misfortune to live in states with high taxes.But it is such a cash cow for the treasury, that it's going to be awfully hard for any administration to do anything substantive about it.

[Burke]

The Taxpayer Advocate has inveighed against the AMT for years, to little avail. As she rather sarcastically noted in one of her reports to Congress, it is especially designed to penalize people with large families, big medical bills, or who have the misfortune to live in states with high taxes.

(I guess that is because it throws out or reduces exemptions, medical expenses, and taxes deducted on the Sche A.) I have found, however, that it rarely kicks in until AGI is around $250K roughly. Large cap gains have done it lately, too.

[JG EA]

(I guess that is because it throws out or reduces exemptions, medical expenses, and taxes deducted on the Sche A.) I have found, however, that it rarely kicks in until AGI is around $250K roughly. Large cap gains have done it lately, too.

Rarely kicks in if they just have regular jobs, but try this scenario:

Large family of 8, Sch C.net Income $100,000, with the type of business that requires many assets say $200,000 worth, regular depreciation taken instead of AMT or 179, then AMT kicks in. Of course on top of the SE tax they need to pay and the payments on equipment they have to pay - hard for a large family. However in this scenario they still are only paying 15+% in taxes, so... it may seem fair to some. Not to the cliients though..

Or salesmen with heavy 2106 deductions. Their income is dependent on huge outlays of cash, and many miles driven, but AMT certainly kicks in at $100,000 less than the $250,000 figure. This is because they may have to spend (including the miles driven) up to 1/4 if their gross income on their business expenses. In this case they are paying 17 or 18% in taxes, but if you take their income minus their employee business expenses the percentage goes up to 23% so... it may seem fair also - again the client doesn't think so..

(I compared the two cases by counting in the SS/Med taxes the W-2 client paid, since they were included in the Sch C clients amount paid .)

[Burke]

I have discovered that it hits many more people than it used to, and I am all in favor of extending the "fix" to help this problem. I would be in favor of automatic indexing of the AMT exclusion amount to the CPI or some other index, which would be politically viable since they would not have to vote on it every year. (Once they got it passed.) I have not yet decided if I am willing to forego it altogether. Higher income persons pay a lower percentage of their overall income in taxes, (1) -- because of the cap on SS/MC taxes, (2) -- due to the favorable divs and cap gains rates, and (3) -- because of their ability to shelter larger amts into tax-sheltered retirement plans.

[JON]

Minnesota

without the fix/or even with it I think it can hit a lot of people in states with income and real estate taxes (on homes, cabins and/or 2nd southern home). I believe House bill 4213 with amendments past the Senate this week with more extenders, but nothing for AMT. If that is right then that is two extenders done without AMT. I hope someone can find me wrong or they are going to do it later. I would bet over halve of my clients will be in it. Remember the rich rich never get there unless alternative taxable income is even higher, which for most of mine there if you in the top bracket and do not get out of it very little can happen.

[Lion]

Taxes

Back a few years I had a nursery school teacher making just over $40,000 who was a single mom with three children. She came in one season after paying her property taxes for the first time on her own following her divorce. We're both thinking nice deduction and larger refund. Wrong! AMT kicked in and had her owing. I'd never seen such a thing to that point; most AMT hit my clients with ISOs. I went over her return and Form 6251 in great detail.

[S T]

2010 Projections

Without the extender bill for AMT in 2010, I have already identified a couple of taxpayers while preparing projections based on 2009, that will be hit with approx $ 2,000-$3,000 AMT due to the reduction in the AMT married joint exemption down to $ 45,000.

If the extender bill is not passed for a married joint higher exemption amount, we will see a lot of our taxpayers pay additional taxes. I am only taliking about a married joint couple with a couple of kids making approximately $ 100,000 to $ 125,000 and property taxes and mortgage interest. Just your basic family with a schedule A.

Sandy

[DaveO]

I have a few clients in the situation that JG EA describes. It's still a shock to them when it happens although I've learned to warn people at risk about it. I tell the gamblers that if they ever hit a really big big payout hold off till they file to pay the state since they will loose that deduction.