Another Year, Another AMT Patch

The alternative minimum tax (AMT) was created in 1969 after Congress heard testimony that a small group of wealthy Americans had used deductions and credits to avoid paying any federal income taxes.1

Because the AMT is not indexed to inflation, it has grown to affect millions of taxpayers (see chart), including many who may not fit the definition of wealthy. In 2009, about 23% of AMT payers had AGIs ranging from $100,000 to $200,000, and 5% had AGIs ranging from $50,000 to $100,000.2

Although Congress frequently enacts temporary patches to exempt low-income and middle-income taxpayers from being subject to the AMT, it’s important to stay abreast of current developments because there is never a guarantee that Congress will continue limiting the AMT’s reach.

Expanding Scope

The AMT is a separately calculated tax that eliminates certain credits and deductions to help ensure that taxpayers with higher incomes pay a minimum amount of tax. Taxpayers subject to the AMT must pay any AMT obligation in addition to their regular tax liability.

The 2010 Tax Relief Act adjusted AMT exemption levels for 2010 and 2011 to prevent an estimated 21 million middle-income taxpayers from being subject to the tax.3 The 2011 exemption amounts are $48,450 for single filers and $74,450 for married taxpayers filing jointly.4 Even with this temporary change, it’s projected that 4.3 million taxpayers may be subject to the AMT in 2011.5

When the current patch expires, as many as 31.2 million taxpayers may be affected by the AMT in 2012 and almost 55 million by 2022.6 However, if recent history is any indication, it seems likely that Congress could enact another patch for 2012.

Regardless of your income, it would be prudent to consider the potential effect of the AMT on your tax liability. Before you take any specific action, be sure to consult with your tax professional.

1) Tax Foundation, 2011
2) Congressional Budget Office, 2010
3–4) CCH, 2010
5–6) Tax Policy Center, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.
Cost Efficient Investment and Financial Planning - Latitude Financial Group
2150 West 29th Avenue, Suite 320 • Denver, CO • 80211
Phone: 720.881.8741 • Fax: 720.881.8786
• partners@latitudefinancialgroup.com

Criteria for the Newsweek and Denver Magazine awknowledgement was taken from The National Association of Board Certified Advisory Practices' (NABCAP) Premier Advisors List.  NABCAP specifically ranked advisory practices using the following criteria: market affluence, team dynamics (who comprises the team), years of experience, credentials/designations, minimum investable assets to become a new client, planning philosophy, investment philosophy, risk philosophy, typical percentage of alternative investment ownership, fee/cost structure, customer service model, U4/ADV status.  NABCAP has not released the number of practices measured in their survey.  Latitude Financial Group, LLC was charged a fee to participate in the survey.

FIVE STAR Wealth Manager Best in Client Satisfaction (2009 and 2010) exclusive recognition awarded by Crescendo Business Services, includes less than 7 percent of wealth managers in the local area and reflects those scoring highest in client satisfaction. Wealth managers were identified by surveys conducted with consumers and financial professionals, and evaluated across nine attributes: customer service, integrity, knowledge/expertise, communication, value for fee charged, meeting financial objectives, post-sale service, quality of recommendations, and overall satisfaction. Favorable and unfavorable evaluations are included in the score. Each wealth manager is reviewed for regulatory actions, civil judicial actions, and customer complaints. Wealth managers do not pay a fee to be included in the research or final list. Scores reflect an average of all respondents and may not be representative of any one client's evaluation.  Working with a recipient of one of the aforementioned awards does not guarantee investment success. 

Securities offered through Securities America, Inc., a Registered Broker/Dealer, Member FINRA / SIPC Advisory services offered through Securities America Advisors, Inc., an SEC Registered Investment Advisory Firm. Scott Cody, Daniel Grote, Dustin Tidwell Representatives Latitude Financial Group and Securities America are unaffiliated. Securities licensed in: CO, WY, NM, NY. AL, IL, VA, WA.  Insurance Licensed in CO, WY,  IL, NY, VA. Advisory Licensed in CO, WY, NM, NY.