AMT 2012
April 17, 2012 9:55 AM   Subscribe

Estimating tax payments for 2012. According to the 1040-ES instructions, the exemption for the alternative minimum tax (for married people) is only $45k, down from $75k in 2011. I don't itemize and will have an adjusted gross income above $45k. Do I need to budget for the AMT?

Let's take a look at form 6251, and guess that the only thing that'll change are the exemptions in line 29. Adjusted gross income (not taxable income, since there's no Schedule A) goes on line 1: estimate $75k. The next 26 lines of "schedule A" and "rich person trick" amounts are all zero. There is no opportunity to subtract the $12k standard deduction or $15k of exemptions for having dependents, so the alternative-minimum-taxable income is $75k. With the 2012 exemption for the alternative minimum tax, this gives $30k on line 30 to be taxed at no less than 26%.

My taxable income is in the 15% bracket. The way I read this form, though, is that a 26% bracket starts at $45k (much lower, actually, since there's no opportunity to take the standard deduction or exemptions). Am I missing something obvious or making a bad guess about how this will go next year? Or have I just discovered why I keep hearing news stories about how "soon the AMT will apply to almost everybody"?

[Anonymous because I don't want "I make $x" associated with this account for ever.]
posted by anonymous to Work & Money (2 answers total) 1 user marked this as a favorite
Disclaimer: IANAL, IANAAccountant. I have directly worked with accounting and tax software in the past and as a result learned a hell of a lot of silly tax codes. I've dealt with AMT before as well. If you are in a position where you need to estimate tax payments, I highly recommend getting an accountant, because the money they can save you often will make up for their cost and then some.

The AMT for a married filing jointly in 2012 is at 26% of income over $45K. The AMT kicks in only if the AMT is greater than your taxes would be under "normal" rules, i.e.

AMT applies IF (Income - $45K) * 26% > Normal rules tax.

For your numbers:
-Under normal rules: For an income of $75K, with deductions of $12K standard deduction and $15K for dependents, your taxable income would be $48K. Tax would be 10% on the first $17,400, and 15% on the rest. That would be $17,400 * 0.10 + $30600 * 0.15 = $6330.
-Under AMT rules: ($75K - $45K) * 0.26 = $7800.

Under this calculation, you are paying AMT. The articles are 100% correct about a boatload of people having to pay AMT under the 2012 rules. FWIW, Congress has passed an "AMT Patch" for several years to increase the exemption on the AMT. Best guesses are that Congress would set the AMT exemptions up around $76K. If Congress sets the AMT rules to $76K your AMT winds up being somewhere around $0, and you pay under normal tax rules. For Estimated Taxes, I would consult with an accountant to see what you actually should pay, as you may need to set aside quarterly payments at the AMT rate until the rules get changed again.
posted by Mister Fabulous at 10:30 AM on April 17, 2012

No. Yes, the AMT is scheduled to fall to $45k. But it's been scheduled to fall dramatically every year for the last decade. Every year since 2000, Congress has extended the current level. They will do so again this year. Don't worry.

If you want a moderately technical but brief overview, try Quick Facts: Alternative Minimum Tax.
posted by Mr.Know-it-some at 12:10 PM on April 17, 2012

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