Steven Maguire
Specialist in Public Finance
The alternative minimum tax (AMT) is a second federal income tax that operates along side the regular income tax. The AMT is intended to ensure that all taxpayers pay at least a minimum amount of tax on income. The AMT disallows or otherwise limits a variety of exemptions and deductions to achieve this objective. Specifically, personal exemptions, itemized deductions for state/local taxes, and miscellaneous itemized deductions account for 96% of the preference items that are subject to tax under the AMT but not subject to tax under the regular income tax. As a result, over certain income ranges, taxpayers who claim itemized deductions for state and local taxes, claim miscellaneous deductions, or have large families are more likely to fall under the AMT than taxpayers who do not have these characteristics.
In 2009, 3.88 million taxpayers were subject to the AMT, a slight decline from 3.95 million taxpayers in 2008. In 2008, New Jersey, Connecticut, the District of Columbia, New York, and Maryland had the highest percentage of taxpayers subject to the AMT. Tennessee, Alaska, South Dakota, Mississippi, and Alabama had the lowest percentage of taxpayers subject to the AMT.
In 2012, absent an increase of the AMT exemption amount, 34.4 million taxpayers will be subject to the AMT. At that time, whether a married taxpayer has itemized deductions for state and local taxes or miscellaneous deductions will become a much less important factor than it is at present in determining AMT coverage. This occurs because, whether they itemize their deductions or not, married taxpayers across a wide range of incomes will be subject to the AMT because personal exemptions are not allowed against the AMT.
The President’s FY2012 Budget proposes an alternative budget baseline where the AMT is permanently indexed for inflation based on 2011 parameters. The estimated revenue loss, assuming the tax cuts enacted from 2001 to 2003 are extended for middle income taxpayers, would be $1.55 trillion. The House-approved FY2012 budget resolution, H.Con.Res. 34, provides for the extension of the tax cuts for all taxpayers and lowers the highest bracket for corporations and individuals. H.Con.Res. 34 also provides for patching the AMT for all taxpayers such that the number of taxpayers subject to the AMT is less than or equal to the number affected by it in 2008.
Date of Report: April 18, 2011
Number of Pages: 12
Order Number: RS22083
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Specialist in Public Finance
The alternative minimum tax (AMT) is a second federal income tax that operates along side the regular income tax. The AMT is intended to ensure that all taxpayers pay at least a minimum amount of tax on income. The AMT disallows or otherwise limits a variety of exemptions and deductions to achieve this objective. Specifically, personal exemptions, itemized deductions for state/local taxes, and miscellaneous itemized deductions account for 96% of the preference items that are subject to tax under the AMT but not subject to tax under the regular income tax. As a result, over certain income ranges, taxpayers who claim itemized deductions for state and local taxes, claim miscellaneous deductions, or have large families are more likely to fall under the AMT than taxpayers who do not have these characteristics.
In 2009, 3.88 million taxpayers were subject to the AMT, a slight decline from 3.95 million taxpayers in 2008. In 2008, New Jersey, Connecticut, the District of Columbia, New York, and Maryland had the highest percentage of taxpayers subject to the AMT. Tennessee, Alaska, South Dakota, Mississippi, and Alabama had the lowest percentage of taxpayers subject to the AMT.
In 2012, absent an increase of the AMT exemption amount, 34.4 million taxpayers will be subject to the AMT. At that time, whether a married taxpayer has itemized deductions for state and local taxes or miscellaneous deductions will become a much less important factor than it is at present in determining AMT coverage. This occurs because, whether they itemize their deductions or not, married taxpayers across a wide range of incomes will be subject to the AMT because personal exemptions are not allowed against the AMT.
The President’s FY2012 Budget proposes an alternative budget baseline where the AMT is permanently indexed for inflation based on 2011 parameters. The estimated revenue loss, assuming the tax cuts enacted from 2001 to 2003 are extended for middle income taxpayers, would be $1.55 trillion. The House-approved FY2012 budget resolution, H.Con.Res. 34, provides for the extension of the tax cuts for all taxpayers and lowers the highest bracket for corporations and individuals. H.Con.Res. 34 also provides for patching the AMT for all taxpayers such that the number of taxpayers subject to the AMT is less than or equal to the number affected by it in 2008.
Date of Report: April 18, 2011
Number of Pages: 12
Order Number: RS22083
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
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