Alternative Minimum Tax - Issue Summary
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| What is the fundamental issue? |
| The Alternative Minimum Tax (AMT) is a tax structure that is designed as a second, parallel tax system operating in tandem with the "regular" income tax. While the concept of a minimum tax dates to 1969, its current configuration was crafted in the 1986 Tax Reform Act. The 1986 AMT was designed to assure that "the rich" pay some tax, even though they might have allowable tax deductions that significantly reduce their regular income tax. The AMT tax base is a broader tax base than the regular income tax, with tax rates that are fairly high. The brackets for the AMT are not indexed for inflation. This feature, along with some other mechanics of the tax, have had the effect of throwing nearly 25 million families into the AMT. Because this was never the intent of the AMT's authors, Congress has, since 2001, provided relief that has the effect of shielding the majority of those 25 million taxpayers from the AMT's burden. That relief, known as the "patch," expired December 31, 2007. |
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| I'm a Realtor®. What does this mean to my business? |
| The AMT does not have a direct impact on the business model most Realtors use. It does, however, penalize individuals who live in states with high state and local income and/or property taxes. Individuals in those states often find themselves paying the AMT, even though their only income sources are from self-employment and wages and their deductions rarely go beyond items such as mortgage interest, charitable contributions and state and local taxes. |
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| NAR Policy: |
| NAR believes current AMT rules are unduly complex and burdensome. NAR opposed the 1986 AMT modifications, but has not reviewed AMT policy since then. |
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| Legislative/Regulatory Status/Outlook: |
| In October 2008, as part of the financial rescue plan (H.R. 1424, the Emergency Economic Stabilization Act), Congress renewed and/or extended a large group of expired and expiring tax provisions. Included in that package was so-called "patch" provision that would shield most middle income taxpayers from the Alternative Minimum Tax during the 2008 tax year. |
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