Expanded Chart and Overmatter

Posted on January 10th, 2014 at 10:53 AM

By Robert L. Moshman

The perpetually problematic alternative minimum tax (AMT) has been addressed numerous times by Congress. Instead of providing another “patch,” ATRA adopted the higher exemption level from 2011 and indexed it for inflation going forward. As a result, it was projected that the AMT would effect 4 million taxpayers for 2012 instead of 30 million. For 2014, an exemption of $52,800 applies to single taxpayers ($82,100 for joint filers). 

The top AMT rate of 28% applies above a threshold amount of $182,500. The AMT doesn’t effect taxpayers who are in the lower brackets, of course; with a rate of 28%, it won’t effect taxpayers in the top brackets, i.e., those paying 35% or 39.6%. As a general rule of thumb, the taxpayers most likely to be effected by the AMT are those with income between $250,000 and $750,000 who take advantage of many tax deductions.

Affected taxpayers should have professionals calculate the likely income tax without the AMT, as well as with the AMT, and then see how much tax can be avoided or deferred by deferring income to next year, accelerating expenses to reduce current
business income, or increasing retirement plan contributions. Although these adjustments are often made toward the end of the year, it can be very useful to project income and expenses at midyear...

For more, read the whole PDF here.

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