Changes to AMT?

I hear vague reports of changes to AMT. Does anybody know the specifics that congress has proposed? Will this effect people who are exercising company stock options? And should this be well understood before the end of

2007, a week from now, so that it can be acted on?

\Samson

Reply to
Samson
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Nothing to get worked up about. IIRC, they are bumping up the excluded income amounts by a few percent, for one year. Of the millions of people paying AMT this shaves about

250 thousand people off that count.
Reply to
joe.weinstein

The IRS Wednesday promised updated forms within 72 hours on their website. That gives people enough time to react (5 trading days). Or, you can read the law now (apparently still waiting for Bush to sign):

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Here's the text:
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Very short, and accurately reported by the press - it increases the exemption amount (the amount you subtract from your AMT income before taking

26%/28%) to $66,250 (joint) and $44,350 (individual).

See Form 6251, line 29 - change the numbers in the line's instruction accordingly.

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's also a phaseout of this exemption for high income - the change to that phaseout isn't quite as clear, though it's hard to believe it would amount to anything other than substituting the new numbers in the worksheet for line 29).

It will affect anyone subject to AMT tax, because it reduces the amount of income subject to AMT.

As always, this is for information purposes only, does not constitute advice, and you should not rely upon it.

Mark Freeland snipped-for-privacy@sbcglobal.net

Reply to
Mark Freeland

The largest annoyance may be a delay in updating tax forms and e-filing software. But the IRS is getting used to December law changes and may get this one out quicker. Last time the delay was seven weeks and into Feburary.

Reply to
rick++

Am I misreading, or does the following imply the number is closer to 25 million?

"Congress on Wednesday gave final approval to a plan that will spare millions of middle-class taxpayers higher tax bills for 2007. ... The tax reprieve postpones for one year only an expansion of the alternative minimum tax, a parallel tax system enacted in 1969 to prevent very wealthy investors from using deductions and tax shelters to avoid paying income tax altogether. The alternative tax has ensnared a growing number of middle-class Americans in recent years because the 1969 law was not indexed to inflation. Without the fix by Congress, some 25 million filers would have had to pay the tax on their 2007 income, up from four million who paid it on 2006 income, according to the White House. The Bush administration took a swipe at Congress, saying that the late action by lawmakers might still cause delayed refunds for up to 38 million filers. The measure would increase slightly the amount of income that is exempt from the alternative tax. For individuals, that means the exempt amount increases to $44,350 in 2007 from $42,500 in 2006. For married couples, the exemption amount climbs to $66,250 from $62,550."

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Reply to
Elle

Very hard to link to Thomas. Try this instead:

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0&srch=/bss/d110query.html&TxtStr=TAX+INCREASE+PREVENTION+ACT+OF+2007 (click on HR 3996 for status/text of legislation; click on "Text" for text, and then chose the last version - the one passed by House and Senate - HR3996ENR).

Reply to
Mark Freeland

There are plenty of news articles out now about the bill that was just passed, raising the AMT exemption levels - the base level of income that is exempt from AMT. The bottom line is, the majority of people who were subject to AMT on Monday aren't subject to AMT today, but those who fell into it last year are likely to again this year.

AMT can affect those who exercise stock options, specifically ISOs (incentive stock options), and the new bill didn't change that. You don't always trigger AMT by exercising options, but that's one of the "preference items" that gets people into the tax. See the Fairmark site for a summary of AMT and ISOs:

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And for tax year 2008, it's all on the table again...Congress just keeps passing one-year "patches" instead of addressing the tax itself. If it isn't patched again, AMT will be harsher in 2008 than 2007, and a 2007 exercise could save some taxes. Congress keeps passing these one-year extensions though.

It is very difficult to figure out whether you'll pay AMT without plugging all your numbers into tax-projection software...it would be a good idea to talk with an accountant or other tax advisor if you're planning an option exercise and are concerned with AMT. Otherwise you can end up with a tax bill from an options exercise, even though you haven't sold anything to raise cash.

-Tad

Reply to
Tad Borek

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