What’s New With the Alternative Minimum Tax?
What’s New With the Alternative Minimum Tax?
The Tax Cut and Jobs Act affected numerous portions of the nation’s tax law. However, one part that hasn’t been discussed much is its effect on the Alternative Minimum Tax (AMT). The AMT has been around since 1969 and its purpose has always been to make sure that wealthy people pay enough in taxes.
But over the years, the AMT was starting to affect more middle-class taxpayers because the rules that governed it weren’t updated as the tax code changed. But that’s all changed now. Under the old law, about 5 million taxpayers would have had to pay the AMT. Now, that number is expected to drop to about 200,000 for the 2018 tax year.
In fact, with so few taxpayers being subject to the AMT this year, the IRS said it plans to remove its AMT Assistant tax tool from its website.
So what has changed?
1. The AMT exemption has gone up significantly. It’s now $109,4000 for those married filing jointly and $70,300 for single filers. It’s $54,700 for married filing separately. By comparison, last year those numbers were $84,000, $54,300 and $42,250.
2. Additionally, the income levels for exemption phase out have also increased. They are $1 million for married couples filing jointly and $500,000 for all other taxpayers.
3. Furthermore, several of the tax breaks that would cause the AMT to apply to middle class taxpayers have been changed. That means it’s much more difficult to trigger the AMT because you need a lot more preference items (such as mortgage interest, personal exemptions, SALT deductions, etc.) to do so.
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