As part of the fiscal cliff deal, there has been a slight change to the Alternative Minimum Tax. This tax doesn't affect everyone, but if it does concern you, then here are five facts about the tax and filing.
There are a lot of taxes out there — some of which you might not even know you’re paying. The Alternative Minimum Tax (AMT) is one such tax that people might overlook.
The fiscal cliff deal made the AMT exemption permanent, but it also fixed the tax. The tax had been created in 1969 and was meant to hit the ultra-wealthy, according to financial advisor Jon C. Ylinen. However, the tax wasn’t adjusted for inflation, and as a result more and more middle class taxpayers were getting hit by the tax. As a part of the fiscal cliff deal, AMT was made permanent and finally adjusted for inflation.
Clearly, AMT doesn’t affect everyone, but if it does concern you (or if you’re not sure if it does), then here are five facts from the IRS about AMT.
1. Who is affected?
If your taxable income plus certain adjustments is more than the AMT exemption amount for your filing status, then you may have to pay the tax.
2. Exemption amount
The 2012 AMT exemption amounts for each filing status are as follows, according to the IRS:
— Single or head of household: $50,600
— Married filing joint or qualifying widow(er): $78,750
— Married filing separate: $39,375
The AMT attempts to ensure that individuals and corporations who claim certain exclusions, tax deductions and tax credits still pay a minimum amount of tax.
Since taxpayers figure AMT using different rules than what is used to figure out regular income tax, the IRS recommends using e-file to prepare and file your tax return. The software determines whether or not you owe AMT and, if so, it figures out how much the tax is for you.
If you’re particularly partial to filing a paper return and cannot or prefer not to e-file, then IRS.gov has an AMT Assistant tool that can help you figure out if you need to pay the tax.