I came across this tidbit this morning, and thought I’d share it with you:
Senate Finance Committee Chairman Max Baucus, D-Mont., and ranking member Charles E. Grassley, R-Iowa, introduced legislation on the first day of the 110th Congress to repeal the individual alternative minimum tax beginning in the 2007 tax year. “This bill is really a bellwether for one of the Finance Committee’s biggest priorities this year,” said Baucus. “The new Congress intends to provide tax relief to middle-income Americans in a fiscally responsible way, and the AMT is the right place to start.”
2006 was the last “patch” year (a “patch” is a temporary increase in AMT exemption levels). That means without another patch or some other fix by Congress, the AMT exemption levels will fall back to where they were in 2001 – something that has ominous ramifications for your 2007 tax return – and the tax returns of about 20 million other Americans.
The Democrats have long stated that AMT reform was a big issue, but with a slim majority it’s hard to say whether they’ll have the votes to get anything meaningful done. And bear in mind that fixing AMT will be expensive – current economic estimates state that to abolish AMT permanently would cost about $60 billion per year for 10 years. My guess is that there will a “compromise” – the AMT thresholds are raised for the 2007 tax year, and some kind of inflation mechanism is built in for future years. We’ll be watching with great interest, though!