The alternative minimum tax (AMT) method does provide each taxpayer with a flat dollar amount that is completely exempt from tax. The dollar amount of your exemption depends on your filing status.
The exemption amounts for 2007 are:
- $66,250 if married filing jointly or as a surviving spouse
- $44,350 if single or a head of household
- $33,125 if married filing separately
In 2007, the available AMT exemption amounts are reduced by 25 percent of the amount by which an individual’s taxable income for AMT purposes (called AMTI) exceeds: $150,000 for joint filers and surviving spouses; $112,500 for single taxpayers; and $75,000 for a married couple filing seperate returns. The AMT exemption amounts are eliminated entirely if AMTI exceeds: $415,000 for joint filers; $289,900 for single individuals and heads of households; and $207,500 for married taxpayers filing separately.
AMT Exemption Amounts for 2008
The AMT exemption amounts increased slightly for 2008. As a result, fewer taxpayers may be subject to the alternative minimum tax than in 2007. The AMT exemption amounts for 2008 are:
- $46,200 for single and head of household filers,
- $69,970 for married people filing jointly and for qualifying widows or widowers, and
- $34,975 for married people filing separately.
AMT Exemption Amounts for 2009
These exemption amounts are scheduled to decrease for 2009. As a result, more taxpayers may be subject to the alternative minimum tax than in 2008. Congress usually legislates an “AMT patch” to raise the exemption amounts, but such legislation is not guaranteed. As such, I usually advise people to plan for the AMT at the lower exemption amounts until we can be sure.
The AMT exemption amounts for 2009 are:
- $33,750 for single and head of household filers
- $45,000 for married people filing jointly and for qualifying widows or widowers, and
- $22,500 for married people filing separately.
Although the exemption amounts have increased in recent years, the AMT rates remain the same for 2001 and beyond. If your AMTI exceeds the exemption amount, you will be subject to a 26 percent AMT rate on the first $175,000 of AMTI ($87,500 for married taxpayers filing separately) that exceeds the exemption amount, and a 28 percent rate on any AMTI above this $175,000 amount.
Work Smart:
There’s no doubt about it — the AMT can play havoc with your tax planning. If your AMT liability and your regular tax liability tend to be approximately equal from year to year, your best bet is to maintain this stability. If your deductions are not so evenly spaced and you tend to have great fluctuations in income from year to year, you may be able to shift some AMT-triggering items from an AMT year to a non-AMT year, so as to reduce your liability in a non-AMT year almost to the point at which you would become subject to the AMT. Your tax professional can tell you whether this might be possible in your individual situation.
