The dreaded Alternative Minimum Tax, or AMT, has been “permanently patched” as a result of the recent passing of the American Taxpayer Relief Act of 2012.
The tax, which was meant for the wealthy but hurt the middle class, received its 19th and final “patch” since it was enacted in 1969. Similar to Social Security benefits, the AMT is now indexed to inflation, causing the AMT income threshold to rise each year.
In order to keep the AMT targeted on the wealthy, taxpayers are allowed an AMT exemption, which decades ago was set at $45,000 – originally high enough to miss the middle class. As median incomes grew each year, the exemption amount was raised, or “patched” to spare the middle class. As little as two weeks ago, the 2012 AMT exemption amount had not been “patched” and was ready to reset to the original $45,000 income threshold.
If the 2012 tax year had not been retroactively “patched,” roughly 30 million taxpayers, or one-fifth of all taxpayers, would have been subject to the AMT and paid an average of $3,400 in extra taxes. Roughly 4 million taxpayers owed AMT in 2011, up from 1.3 million in 2001.
The retroactive AMT patch exemption amounts for 2012 are:
- Married Filing Jointly: $78,750
- Qualifying Widow(er): $78,750
- Single: $50,600
- Head of Household: $50,600
- Married Filing Separately: $39,375
The AMT exemption amounts if NOT patched for 2012:
- Married Filing Jointly: $45,000
- Qualifying Widow(er): $45,000
- Single: $33,750
- Head of Household: $33,750
- Married Filing Separately: $22,500
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.