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|Subject: Re: Tax Cut Bill||Date: 11/24/2005 1:15 PM|
|Author: valuefanRLA||Number: 48389 of 76084|
And it's particularly nasty if you're filing single rather joint return.
I think we're getting a little too caught up in the hype. To be sure no one likes the AMT, including me - simply because it means that I could end up paying more tax. However, I have prepared many a tax return and have not seen that many cases. True, the number of people subject to AMT will go up. Let me explain...
AMT itself is not a bad thing. AMT resembles (in a loose way) a flat tax, which so many people SEEM to be in favor of. I say seem because the minute you take away a person's "deductions" they throw their hands up in frustration. AMT basically takes away a lot of your "special" deductions, and re-calculates your tax at 20%.
Then, this tax is compared to your regular tax, which includes all your deductions. If the AMT is higher, you basically pay that amount. With the tax brackets coming down, more and more people will end up being subject to AMT. It doesn't mean that they are going to pay more tax than they did last year. It just means that the tax rate cuts won't have as much effect.
Finally, whenever someone is subject to AMT, the amount of AMT which is above your regular tax becomes a credit against your future regular tax, when you are no longer subject to AMT. (sorry, that wording is terrible - but I'm to lazy today to try and fix it). :-)
I guess what I'm trying to get at here is that AMT is not the end of the world. The media is hyping this thing, just like they do the flat tax. Oh, and don't get me started on the flat tax proposed by Forbes. What they don't tell you is that Forbes would basically pay NO tax under that system. But that's another story for another board.
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