Written by: Keith Frame, CPA
Thanks to changes in the American Taxpayer Relief Act of 2012, many taxpayers have been spared thousands of extra dollars in Alternative Minimum Tax for the 2012 tax year.
The provision that would have socked many taxpayers flew under the radar during the “fiscal cliff” negotiations in Congress. While everyone was focused on the changes to take effect January 1, 2013, many tax provisions had expired on December 31, 2011 with the AMT problem being one of the largest issues.
As you may recall, the Alternative Minimum Tax (AMT) was created in the 1970’s to hit taxpayers claiming “too many” deductions and other tax benefits and was aimed squarely at the super-rich. But the exemption amount was not indexed for inflation so over time many more taxpayers became subject to the tax.
The exemption amount has been increased by Congressional action each year over the last several years but because of the political battles in Washington, it was not clear what would happen this year. Thankfully, reason has prevailed and the estimated 30 million taxpayers that might have been hammered with this tax in 2012 will not come to pass.
Congress has permanently indexed the AMT exemption amount for inflation so this annual tax problem appears to be gone for good.