What is the Alternative Minimum Tax (AMT)?
In general, the tax law is designed to give preferential treatment to certain kinds of income, while allowing special deductions and credits for certain kinds of expenses. The Alternative Minimum Tax (AMT) attempts to ensure that anyone benefiting from these tax advantages pays at least a minimum amount of tax. It is a separately figured tax that eliminates many deductions and credits, thus increasing tax liability for individuals who would otherwise pay less tax. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount. Exemption amounts are set by law for each filing status and are listed in the IRS Form 6251 Instructions.
The Alternative Minimum Tax (AMT) is a lesson in why you don’t depend on the bureaucracy of big government to solve your problems. Back in the 1960s, there was an uproar when it was discovered that some high income individuals were not paying any federal income tax. How did they achieve this wonderful status? By taking advantage of various deductions allowed by the overly complex IRS tax code – nothing illegal, although perhaps trying to manipulate and take advantage of the rules. And how many people fell into this category? Not many, we’re talking dozens or hundreds, not millions. So in their grand wisdom, the Alternative Minimum Tax was invented and became part of the federal tax system in 1969-70. Now it functions as a second tax system, forcing 10s of millions of people to calculate two tax returns and then pay the MAXIMUM or GREATER tax – not the minimum, so the name itself is misleading — pretty high price to pay to get those 50 rich folks to pay their share of taxes, huh? How t
Legislation passed in 2008 will protect millions of taxpayers from paying higher taxes under the Alternative Minimum Tax when they file their 2008 returns. Similar legislation passed by Congress late in 2007 led to delays for some taxpayers when filing their 2007 tax returns, but there are no such delays for 2008 filing.
