Each year, Congress usually makes a last-minute adjustment to keep the Alternative Minimum Tax (AMT) from hitting a large number of taxpayers. Although action has not yet been taken for 2010, a letter to the Internal Revenue Service Commissioner from key members of the House and Senate indicates that there’s hope for the enactment of a 2010 AMT “patch.”
Under current law, the AMT exemption amounts for 2010 are $33,750 for unmarried taxpayers; $45,000 for married couples filing jointly and surviving spouses. Senate Finance Committee Chairman Max Baucus, House Ways and Means Committee Chairman Sander Levin, and two other key members of the House have written to IRS Commissioner Shulman stating that they “plan to do everything possible to enact AMT relief legislation in a form mutually agreeable to the Congress and the President.” They’d like to raise the 2010 AMT exemption amounts to $47,450 for individuals and $72,450 for married taxpayers filing jointly.
There’s a decent chance that a 2010 fix can be accomplished, sparing about 21 million taxpayers from higher taxes. It will take longer to develop a more permanent solution to the fact that the AMT (created in 1969 to ensure that high-income earners paid at least some tax) was not set up so that its income targets would adjust with inflation. Consequently, it now tends to snag middle-income families as well as higher-income taxpayers. It’s anyone’s guess as to whether Congress will get around to the larger question of a permanent fix for the AMT in 2011.