| AMT Rules Become Permanent
Perhaps you've heard about the permanent patch for the alternative minimum tax (AMT), which was part of the new tax legislation that became law in January. The change eliminates the need for the annual wait for Congress to "fix" the AMT exemption, and means less uncertainty going forward. If you're wondering how the new rules will affect your 2012 federal income tax return, here are the details.
In general, the basic calculation of your 2012 AMT liability remains the same as in prior years. That is, you begin with the income on Form 1040, and adjust it for items that are treated differently under the AMT, such as certain itemized deductions. Then you subtract the AMT exemption to arrive at the income subject to the tax.
What changed? The permanent patch increased the exemption you use to reduce AMT income. For 2012, when you're single, the exemption is $50,600. It's $78,750 when you're married filing jointly (or a surviving spouse), and $39,375 if you're married and file separate returns.
One thing to note: your exemption can be less, depending on the amount of your AMT taxable income. For example, when you're married filing jointly and your AMT taxable income exceeds $150,000, the exemption begins to phase out. The reduction starts at $112,500 when you're filing single, and $75,000 if you're married filing separately.
Want to know more about the alternative minimum tax and its impact on you? Call us. We specialize in plain-language explanations, as well as practical AMT planning suggestions.
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