AMT Could Hit 20% of Taxpayers in 2010

(UPDATE 12/22/10:  The tax bill signed into law on December 17, 2010, does provide an AMT patch that will help millions of Americans avoid the AMT.  Read the story here.)

We are hearing constantly about Congress debating the "Bush Tax Cuts" and whether to extend the tax cuts for only people who earn less than $250,000 a year, or to extend them for all taxpayers.  But there are other tax provisions unrelated to the Bush Tax Cuts that Congress needs to take action on this month -- and in my opinion, the most important of those provisions is the alternative minimum tax (AMT).

If Congress does nothing regarding the AMT, millions upon millions of taxpayers (an estimated 1-in-5) will be hit with this tax, which, when it was enacted in 1969, was only supposed to hit a few extremely wealthy people.  The AMT exemption amount for a married couple will drop from $70,000 in 2009 to just $45,000 in 2010; and from $46,700 in 2009 for single or head of household to $33,750 in 2010. 

The AMT is too complex to go into in one article, but suffice to say that at the very least, Congress MUST extend the 2009 exemption amounts into 2010 or lots of people will be very unhappy when they find out they owe this tax….