Honey, I Shrunk the AMT (But It’s Not Gone)
The tax act Congress passed early on New Year’s Day permanently patched the alternative minimum tax (AMT), sparing tens of millions of Americans from the additional levy. But it won’t protect everyone. The AMT will continue to raise the taxes of a few million taxpayers each year, often in seemingly capricious ways. And more and more Americans will owe AMT in future years.
New estimates from the Tax Policy Center project that 3.9 million taxpayers will pay an average of about $6,600 in AMT for 2013, increasing their average effective tax rate by 1.7 percentage points. And the percentage of taxpayers who owe the additional tax—4.2 percent this year—will rise steadily over the next decade before leveling off at about 5.5 percent. That means more than 6 million taxpayers will pay AMT in 2023.
As in the past, married couples, families with more children, and people living in high-tax states will be most likely to incur the added tax. Taxpayers with income between $200,000 and $1 million will be most affected: about one-third of them will owe AMT.
For nearly a decade, Congress temporarily adjusted the AMT exemption every year or two to keep the tax from hitting millions of unsuspecting taxpayers. Those fixes often came late in the year, creating a lot of uncertainty for taxpayers. The American Taxpayer Relief Act of 2012 (ATRA) permanently indexed the exemption and other AMT parameters. Congress might have gone the extra mile and eliminated the AMT entirely, but that would have cost more than $350 billion in lost revenue over the next decade.
So the AMT lives on, complicating the tax returns of more Americans every year. For many, it will come as a nasty surprise: new AMT taxpayers often learn about the bonus tax only when a letter from the IRS tells them they owe extra tax plus interest and possibly penalties.
And, as bad tax policy as it is, the AMT is unlikely to go away—not unless comprehensive tax reform finally rids us of this tax code abomination.
Original article can be viewed here.
Projections of the number of AMT taxpayers; the amount of AMT revenue; the average AMT liability; the distribution of AMT taxpayers by income, filing status, children at home and level of state taxes; the distribution of AMT liability by income; and the interaction of the AMT with the 2001-2010 tax cuts. The tables cover various years through 2023 and present projections of AMT under current law and pre-ATRA law.
T13-0208 – Aggregate AMT Projections and Recent History, 1970-2023 (August 26, 2013)
Historical data and projections of AMT taxpayers and revenue under current law, pre-ATRA law, and pre-EGTRRA law.
T13-0209 – Aggregate AMT Projections, 2012-2023 (August 26, 2013)
Projections of AMT taxpayers, AMT revenues, and percentage of tax-units affected by the AMT under current law and pre-ATRA law for 2012-2023.
T13-0210 – Characteristics of AMT Taxpayers, 2012-2014, 2023 (August 26, 2013)
Displays the number of AMT taxpayers as a percentage of all tax-filers across expanded cash income levels, filing status, number of children at home, and state tax level, under current law and pre-ATRA law.
T13-0211 – AMT Revenue per AMT Taxpayer, 2012-2014, 2023 (August 26, 2013)
Displays the average AMT tax liability per AMT taxpayer across expanded cash income level, filing status, number of children at home, and state tax level, under current law and pre-ATRA law for 2012-2014 and 2023.
T13-0212 – Average Effective AMT Tax Rate, 2012-2014, 2023 (August 26, 2013)
Displays the average effective AMT tax rate across enxpanded cash income level, filing status, number of children at home, and state tax level, under current law and pre-ATRA law for 2012-2014 and 2023.
T13-0213 – Distribution of AMT and Regular Income Tax by Cash Income, Current Law, 2012-2014 (August 26, 2013)
Distribution of AMT taxpayers, share of AGI and share of AMT and regular income tax liability by expanded cash income level under current law between 2012 and 2014.
T13-0214 – Income Subject to Tax and Effective Marginal Tax Rates in the Regular Income Tax and the AMT among AMT Taxpayers, Current Law, 2012-2014 (August 26, 2013)
Compares the effective marginal rates for AMT taxpayers under the regular income tax and the AMT and also the income subject to tax under the regular income tax and the AMT, by expanded cash income level, under current law, between 2012 and 2014.
T13-0215 – Effect of the AMT on ATRA Individual Income Tax Cuts, 2013 (August 26, 2013)
Displays the effect of the AMT on ATRA individual income tax cuts for the year 2013. Specifically, it presents the percentage of tax-units who lose their individual income tax cuts partially or completely due to the AMT and the percentage reduction in the individual income tax-cuts due to the AMT across expanded cash income levels