Congress enacted the AMT so that these people had to pay a certain amount, regardless of the deductions and exemptions that would otherwise be available to them. The problem with the AMT is that it was not created with an inflation adjustment. So over time, the AMT stopped applying to just the very wealthy and started affecting middle class taxpayers. Each year, Congress has to pass an “AMT patch,” thus reducing the number of people who fall into AMT territory. Technically every taxpayer must calculate their taxes under both the “normal” rules and the AMT rules. The AMT rules allow for fewer and different deductions and deductions, and income is taxed at a flat tax rate.

As part of the current tax law, the AMT exemption amounts are:

   AMT Exemption                   Single            Married Filing Joint
AMT Exemption 2009            $46,700                     $70,950
AMT Exemption 2010            $47,450                     $72,450
AMT Exemption 2011            $48,450                     $74,450
AMT Exemption 2012            $33,750                      $45,000

As you can see, the AMT patch was temporary and does not apply to 2012. Congress has passed 14 annual AMT patches since 2003 to raise the AMT exemption amounts and thereby reduce the number of taxpayers subject to its sweep. The 2012 AMT exemption amounts have reverted to their levels in tax year 2000 ($45,000 for joint filers, $33,750 for single filers). In tax year 2009, 24% of AMT filers were those with an adjusted gross income of between $100,000-$200,000, and 63% of AMT filers were in the $200,000-$500,000 range. It is far from certain that additional AMT patches will continue to be passed. Without a legislative patch this reduction in the AMT exemption amounts will vastly increase the number of taxpayers subject to the AMT, who will incur additional income taxes. The alternative minimum tax (AMT) is poised to claim its greatest number of victims in 2012.


July 27, 2012 12:00 am