Tax Bulletin: Individual AMT Relief Awaiting Presidential Signature
On December 19, 2007, the U.S. House of Representatives passed the Tax Increase Prevention Act of 2007, which would provide temporary relief for noncorporate taxpayers subject to the alternative minimum tax (AMT). President Bush is expected to sign the bill into law.
The AMT imposes a tax based on "alternative minimum taxable income" (AMTI), which is calculated by disallowing certain deductions that otherwise are allowed in computing regular tax liability and by adding certain income that is otherwise excluded in computing regular tax liability. The AMT is imposed at rates of up to 28% on the amount of AMTI that exceeds an "exemption amount." The exemption amount, which is not indexed for inflation but has been increased in each of the past few years in a series of stop-gap tax bills, will once again be increased, but only for the 2007 tax year. The Act increases the exemption amount for 2007 for joint or surviving spouse taxpayers to $66,250 (up from $62,550 for 2006). For single taxpayers the exemption amount for 2007 increases to $44,350 (up from $42,500 for 2006). The increased exemption amount for 2007 will reduce the AMT liability of many taxpayers.
The Act also extends a provision that allows certain nonrefundable personal credits to offset both the regular tax and the AMT.
The IRS has announced that it will begin the final reprogramming steps that will allow its processing systems to account for the changes to the AMT under the Act. The IRS also has indicated that revised tax forms should be available on www.IRS.gov within 72 hours after the bill is signed into law.
If you have any questions, please contact one of the attorneys listed below.
IRS Circular 230 notice: Any tax advice contained herein was not intended or written to be used, and cannot be used, by you or any other person (i) in promoting, marketing or recommending any transaction, plan or arrangement or (ii) for the purpose of avoiding penalties that may be imposed under federal tax law.