Alternative Minimum Tax -- read this!
Dec. 21st, 2005 11:30 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
javasaurusI ranted about this last year, but as the new year approaches and we'll all be receiving tax forms soon, it bears repeating. DO NOT IGNORE THE ALTERNATIVE MINIMUM TAX!
To the best of my knowledge, they have not fixed it this year, and more and more people are being hit by it.
It was set up back in the 70s as a way to force rich people to pay taxes despite their various shelters, etc. Basically, it says that if you are rich, but paying little tax because of lots of deductions, you have to pay some taxes anyway. But in the last 30 years, inflation has changed the meaning of "rich" but the AMT hasn't kept pace.
If your household makes $70k or more, you have a high chance of getting hit by the AMT, especially if you have large deductions for mortgage interest, children, etc. Exercising stock options can also be a major AMT trigger. So don't ignore this line in your taxes. It's a pain to go through the worksheets, but ya really need to do it.
EDIT: just adding a bit more.
You know all those "tax breaks" that Bush provides? Because of the AMT, for most middle class families, they are smoke and mirrors -- if your regular tax amount dips too low because of these tax breaks, the AMT kicks in and you only get a partial break. Within a couple of years, those breaks won't really mean anything because the people getting them will be paying AMT anyway.
Some numbers: about a fifth of households with $75k to $100k incomes will be paying AMT this year; double that for those with $100k to $200k incomes.
Basically, you get to figure out your taxes twice. Two completely different systems: the normal one (lots of deductions) and the AMT (very few deductions, and much different rate structure). Then you get to pay the higher of the two. Nice "alternative," eh?
To the best of my knowledge, they have not fixed it this year, and more and more people are being hit by it.
It was set up back in the 70s as a way to force rich people to pay taxes despite their various shelters, etc. Basically, it says that if you are rich, but paying little tax because of lots of deductions, you have to pay some taxes anyway. But in the last 30 years, inflation has changed the meaning of "rich" but the AMT hasn't kept pace.
If your household makes $70k or more, you have a high chance of getting hit by the AMT, especially if you have large deductions for mortgage interest, children, etc. Exercising stock options can also be a major AMT trigger. So don't ignore this line in your taxes. It's a pain to go through the worksheets, but ya really need to do it.
EDIT: just adding a bit more.
You know all those "tax breaks" that Bush provides? Because of the AMT, for most middle class families, they are smoke and mirrors -- if your regular tax amount dips too low because of these tax breaks, the AMT kicks in and you only get a partial break. Within a couple of years, those breaks won't really mean anything because the people getting them will be paying AMT anyway.
Some numbers: about a fifth of households with $75k to $100k incomes will be paying AMT this year; double that for those with $100k to $200k incomes.
Basically, you get to figure out your taxes twice. Two completely different systems: the normal one (lots of deductions) and the AMT (very few deductions, and much different rate structure). Then you get to pay the higher of the two. Nice "alternative," eh?
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no subject
Date: 2005-12-21 05:28 pm (UTC)no subject
Date: 2005-12-21 10:22 pm (UTC)no subject
Date: 2005-12-22 12:49 pm (UTC)We've triggered the warning for the past three years, but always managed to not get pinched by it. Don't know about this year yet.
what the H*** is so frickin' wrong with indexing these numbers? Other than the fact that it's a way to raise people's taxes without actually having to tell them that it's being done -- skanky, sleazoid politicians. There is a similar problem with the earned income tax credit and the minimum income level for owing any tax. If they indexed the minimum income level, then most people wouldn't even *need* the EITC.
no subject
Date: 2005-12-22 04:37 pm (UTC)Then write a tax code that is FAIR to the majority of the middleclass and if it nails the 'rich' so be it. I would also like to see (in my own perfect little world) people whose income is 'tip based' (e.g. waitstaff) declare their full income (and pay taxes on it)). I would also like to see the forms made simple enough that people wouldn't need to pay accountants (or buy TurboTax or other 1 year use programs) in order to do their taxes. While Math isn't easy for everyone, anyone with a HS degree who doesn't have senility issues should have a reasonable chance at filling out their tax forms correctly and getting the proper deductions included (or is it discluded?).