It’s an announcement tax planners are relieved to hear. In a letter to the IRS Commissioner on November, a bipartisan group of Congressmen and Senators affirmed their commitment to passing Alternative Minimum Tax (AMT) relief. The move could save the average tax payer more than $10,000 in taxes in 2010.
The AMT is a sort of hard floor. Applicable income is determined by subtracting a base exemption amount, which phases out at higher income levels. This amount is then taxed at 26% or 28%. AMT is only paid if the amount is greater than what one would pay in regular income tax. Essentially, AMT keeps a taxpayer from using tax shelters and other means to completely negate their taxes.
In 2009 the exemption amounts were $46,700 for unmarried individuals and $70,950 for married couples filing joint returns. In 2010 the amounts are currently slated to go back to 2000 levels, 33,750 for unmarried individuals and $45,000 for married couples filing jointly.
The proposed relief will raise the exemptions toto $47,450 for individuals and $72,450 for married taxpayers.
For more on the Alternative Minimum Tax or for other tax law issues, contact Horowitz & Weinstein.