AMT Tax Relief

A one-year fix on the alternative minimum tax.

By Mary Beth Franklin, Senior Editor

From Kiplinger's Personal Finance magazine, May 2009

The stimulus package has a one-year fix to prevent 26 million additional taxpayers from being snared by the alternative minimum tax. The law increases the income threshold for the AMT to $46,700 for individuals (up $500 from 2008) and to $70,950 for couples in 2009 ($1,000 higher than last year.) But if you paid the AMT in 2008 and your finances remain about the same, you'll probably pay it again in 2009.

For taxpayers, that means doing your taxes twice. First you figure your regular federal tax and then the AMT; you pay whichever is higher. The AMT disallows many of the usual tax breaks -- such as deductions for state and local taxes and personal exemptions for you, your spouse and each of your dependents. As a result, taxpayers with large families or those who live in high-tax states are more likely to be subject to the tax.

The AMT was created 40 years ago to ensure that the very rich would pay at least some tax. However, it wasn't indexed for inflation, so it became a tax for the masses. Congress has approved patches, but not a long-term fix.

See More From the Stimulus Guide

The New Stimulus Tax Credit

This tax break puts up to $400 in your pocket.

New Car Sales-Tax Deduction

Car buyers have till the end of the year to grab this above-the-line deduction.

Better Benefits for the Unemployed

Qualified filers get an extra $25 a week.

New Homebuyer Credit

Take up to 10% off your purchase price.

Health-Care Subsidy for the Unemployed

Now there's extra help for paying COBRA coverage.

College Aid Gets Fresh Funding

Rather than introduce big new ideas, this bill mostly replenishes underfunded programs and increases amounts available to families.

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