| Originally, this tax was meant to hit a little over one | | | | figure. This exemption has gone up over the year but |
| hundred families who had taken advantage of so | | | | only when new legislation is enacted by Congress. For |
| many tax deductions that they did not owe much in | | | | anyone who is filing as single or head of household in |
| income taxes. This came into effect back in 1969. | | | | 2009, the exemption is listed at $46,700 while anyone |
| These were high net worth families who were using | | | | who is filed married jointly has an exemption of |
| tax shelters and finding ways to lower their tax bills to | | | | $70,950. Once you have your net income figure from |
| as little as possible. The alternative minimum tax laws | | | | using your income minus the exemption, you then |
| have changed to a degree but they have continued to | | | | calculate .26X your net income. If you make over |
| affect more and more people as the years have gone | | | | $175,000, you multiply .26x $175,000 + .28x remaining |
| on. | | | | income. This will let you know the minimum amount of |
| To give a short explanation of what it is, alternative | | | | tax that you owe. If this amount is less than your |
| minimum tax is a form of taxing that takes away | | | | regular tax bill, you do not owe any more taxes. If the |
| many of the deductions that other taxpayers are able | | | | alternative minimum tax is greater than your regular |
| to claim. With it, there is a minimum tax rate usually | | | | tax bill, you owe the IRS extra money. |
| around 26% to 28%. Some of the different deductions | | | | This particular tax form has faced sharp criticism |
| that are not allowed to be used include: accelerated | | | | because there has been no change within the tax |
| depreciation, some itemized deductions, among others. | | | | code to account for inflation. This has affected a |
| The end result is that it makes you pay a certain | | | | significant number of people and the Congressional |
| graduated minimum amount in taxes based upon your | | | | Budget Office has estimated that by 2010, one in five |
| income. | | | | people will be affected by the alternative minimum tax. |
| When attempting to figure out whether you owe | | | | This goes even further that any married person |
| alternative minimum tax, there is a different set of rules | | | | making between $100,000 and $500,000 will face this |
| that are applied than when dealing with regular taxation | | | | same situation using the same estimates from the |
| laws. Taxable income is calculated and certain tax | | | | Congressional Budget Office. |
| preference items (usually your deductions-talking about | | | | As you can see from this article, the alternative |
| examples from above like accelerated depreciation) | | | | minimum tax is not a good thing for most people. It is |
| are added back in to your income. An alternative | | | | something that Congress has looked into but not made |
| minimum tax exemption is subtracted off this income | | | | any changes to the tax code yet through legislation. |
| and then your minimum tax is calculated from that | | | | |