javasaurus (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
javasaurus) wrote2005-12-21 11:30 am
javasaurus) wrote2005-12-21 11:30 am
Alternative Minimum Tax -- read this!
I 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?
no subject
no subject