While the president and Congress dither over what to do about the Fiscal Cliff, there’s another issue facing that needs to be addressed before the end of the year: an adjustment to the alternative minimum tax rules. For the 2011 tax year, the first $74,450 of income for married taxpayers was exempt under the AMT, but if Congress fails to act, this exemptions will fall to $45,000, making a lot more families subject to that tax. The result is that 28 million more taxpayers would be hit by the AMT.
The lowering of the exemption means that married couples with adjusted gross income between $200,000 and $500,000 would pay an average of almost $11,000 in AMT. That’s in addition to their regular tax liability. But they’re not the only ones who would pay more: About 88 percent of taxpayers with incomes between $100,000 and $200,000 would pay an average AMT of over $3,100. Even those making just $50,000 could end up paying $1,000 more.
In the past, Congress has routinely adjusted the AMT exemption upward to adjust for inflation. There’s still time for them to do it prior to the 2012 filing season as well. Let’s hope they act before all of us are faced with bigger tax bills.
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