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 2010, 4.02 million taxpayers were subject to the AMT, a slight increase from
3.88 million taxpayers in 2009. In 2010, New Jersey, Connecticut, the
District of Columbia, and New York had the highest percentage of taxpayers
subject to the AMT. Mississippi, Tennessee, Alabama, and South Dakota had
the lowest percentage of taxpayers subject to the AMT.
In 2012, absent an increase of the AMT exemption amount, 32.4 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 FY2013 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 $1.9 trillion over the
FY2013-FY2022 budget window.
Date of Report: December 4, 2012
Number of Pages: 13 Order Number: RS22083 Price: $29.95
For email and phone orders, 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.