The
2003 Tax Act (Jobs and Growth Tax Relief Reconciliation Act of 2003 -
JGTRRA) was signed into law in May 2003, followed more recently by the
Working Families Tax Relief Act of 2004 (WFTRA), which was signed into
law in October 2004, and the Tax Increase Prevention and Reconciliation
Act of 2005, signed into law in May 2006.
As
is typical of recent tax legislation, the 2003, 2004 and 2005 Tax Acts
offered tax relief to individuals, but did so through a variety of
complex provisions that included retroactive, temporary and
phased-in/phased-out effective dates. While some of these provisions
may not apply to you, other provisions will and you may want to revise
your planning to take full benefit of those provisions.
Today's topic is alternative minimum tax relief. If you would like additional information on this topic, please call my office.
Alternative Minimum Tax Relief
The objective of the alternative minimum tax (AMT)
is to ensure that taxpayers with itemized deductions and/or income from
certain tax preferences will not avoid or defer all tax liability, but
instead will pay a minimum tax. The AMT applies if certain tax
benefits, when added back to income, result in an AMT tax that exceeds
the regular income tax.
The alternative minimum tax rate is:
- 26% on the first $175,000 ($87,500 married filing separately) of AMT income, after the AMT exemption; and
- 28% on AMT income over $175,000 ($87,500 married filing separately).
While each taxpayer receives an AMT exemption,
increasing numbers of middle-income taxpayers are being hit with the
AMT, the provisions of which are not indexed for inflation.
In
recent years, Congress has passed an annual "patch" that increases the
AMT exemption amount, but only on a temporary basis, as was the case
for 2010 and 2011. The hope is that Congress will either pass another
"patch" for 2012 or will finally permanently reform the AMT.
The
AMT exemption is based on filing status and is reduced by 25 cents for
each $1 of income subject to AMT that exceeds specified amounts:
AMT Exemption Amount:
| Filing Status |
2010 |
2011 |
2012 and later(2) |
Reduced by 25% of AMT Income Over: |
Eliminated if AMT Income Exceeds: |
| Married filing jointly and qualifying widow(er) |
$72,450 |
$74,450 |
$45,000 |
$150,000 |
$330,000 |
| Single and head of household |
$47,450 |
$48,450 |
$33,750 |
$112,500 |
$247,500 |
| Married filing separately |
$36,225 |
$37,225 |
$22,500 |
$75,000 |
$165,000 |
Planning notes:
- Unfortunately,
there are no specific tests to indicate AMT liability. If you claim
itemized deductions and/or certain tax preference items, you must first
figure your regular income tax and then calculate AMT. If AMT exceeds
your regular tax, your tax liability is increased by the difference.
- Assuming Congress does not pass another AMT "patch" or permanently reform the AMT
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PLANNING YOUR TIME
by Tom Hopkins
Make
it a firm habit to sit down for a few minutes every evening to plan
what you must do tomorrow. List them in the order of importance. This
is the one and only system many highly successful people use.
To
get yourself organized, list all the things you can do and learn to
make yourself more effective. Work out a schedule that will get them
done or learned in the shortest possible time.
When
you start making lists the night before, your subconscious mind will
work on your list all night without disturbing your sleep to help you
solve your problems and achieve your goals. Your subconscious, however,
can't help unless you tune it in to what's going to happen next.
Give
this process several days to start flowing. Go over your list in a
quiet room. See yourself involved with the most difficult part of each
thing on your list. Make the sessions brief and upbeat. See yourself
happily enjoying the fact that you've successfully accomplished each of
your goals for tomorrow.
Don't
concentrate on fear and dread of what you have to do. If you do that,
your subconscious may figure out ways to make you forget or otherwise
avoid meeting what is sees as painful experiences.
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