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The AMT just won’t go away

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. Didn’t the 2013 tax law finally eliminate the alternative minimum tax? R.B., Philadelphia

A. No. But the American Taxpayer Relief Act of 2012 (ATRA), which was signed in 2013, permanently increased the exemption amounts for the alternative minimum tax (AMT) and also indexes the exemption amounts for 2013 and beyond to compensate for inflation. Previously, the exemption amounts had been “patched” with increases over the last decade to mitigate the effects of AMT. But note that the AMT exemption amounts phase out for higher-income taxpayers. With the phaseout, the AMT exemption amount is reduced by $1 for every $4 above the applicable threshold.

Tip: ATRA also indexes the threshold for applying the top AMT rate of 28%. For 2013, the 26% rate applies to AMT income up to $179,500 (up from $175.000).

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