AMT ALERT
The fate of the alternative minimum tax (AMT) for 2010 is still looming. If nothing changes, the number of taxpayers subject to the AMT is expected to rise from 4 million in 2009 to 27 million in 2010.
The exemption amount is scheduled to decrease dramatically – from $46,000 to $33,750 for single and from $70,950 to $45,000 for married taxpayers filing jointly. This means that if your income and deductions are exactly the same for 2010 as they were for 2009, your AMT could increase significantly and you could find yourself writing a check to the government for an additional $7000 more.
Individuals must compute their income taxes under two systems—the regular tax system and the AMT system—and pay the higher of the two amounts. When introduced many years ago, the AMT targeted and normally only applied to high-income taxpayers who, in Congress’ opinion, benefited too much from certain tax breaks. Today, however, virtually no taxpayer can ignore the AMT. Therefore, the first step in tax planning is to assess your exposure to AMT. Tax planning for AMT is often dramatically different than planning for regular tax. In fact, it’s sometimes backwards.
Who is at the highest risk for AMT? Many taxpayers can fall into AMT, but those who deduct a significant amount of state and local taxes or miscellaneous itemized deductions (like unreimbursed employee business expenses) or claim multiple dependents are especially vulnerable. Those who recognize a large capital gain or exercise incentive stock options during the year are also vulnerable. If you suspect AMT might be an issue, please contact us so we can plan accordingly.
To help you see where you are with respect to the AMT, look at line 45 on your 2009 Form 1040 and Form 6251 in your tax return. At GBA we are proactive and calculate the AMT for each and every taxpayer.
