AMT: Tax Break For The Middle Class
12-20-2007, 10:49 AM
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AMT: Tax Break For The Middle Class
Please consult your own tax preparer, CPA or financial planner for any tax implications this may have on you. Let me also take this opportunity to encourage everyone to take year-end steps and minimize your tax burden, particularly those who itemize their deductions.
From New York Times:
WASHINGTON -- Congress on Wednesday gave final approval to a plan that will spare millions of middle-class Americans higher tax bills for 2007 -- about $2,000 on average. The White House welcomed the development and said President Bush would sign the bill, even as it took a swipe at Congress, saying the late action by lawmakers might cause delays in refunds for up to 38 million filers.
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 citizens 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 4 million who paid it on 2006 income, according to the White House. Many of the beneficiaries of the AMT fix are people with incomes in the $75,000 to $200,000 range.
The alternative minimum tax requires taxpayers -- generally those who deduct items such as high medical expenses and state and local taxes and who claim credits for dependents -- to make separate calculations and pay the one producing the higher figure.
Treasury Secretary Henry Paulson, while thanking the House for approving the bill, warned that there would likely be some delays "including delays of some refunds." Changes in the tax code require substantial work, especially in reprogramming IRS computers.
Officials on Wednesday said they could not project how many taxpayers might be affected by delays. Previously the IRS had said that a delay in congressional action until Christmas could stall as many as 38 million tax returns corresponding to $87 billion in refunds.
The IRS said that within 72 hours it would post on its Web site revisions to a dozen forms affected by the change.
The vote on the alternative tax plan came on the final day of the first session of the 110th Congress, which ended with a burst of last-minute legislation including final adoption by the House of a $555 billion budget package. But it was the tax plan that gave a discordant note to the last day before the holiday recess.
House Democrats angrily approved the bill after giving in to demands by congressional Republicans and Bush that the tax cut not be offset by raising other taxes. Democrats started out the year by pledging to pay for the $50 billion cost of the AMT fix with cuts in spending or increases in taxes elsewhere.
The Democrats repeatedly tried to get Senate Republicans to back a plan that would have paid for the cut by imposing new taxes, particularly on wealthy hedge fund managers.
But the Republicans refused, leaving Democrats little choice but to break their promise. By not offsetting the cost, the U.S. debt will rise by $50 billion.
Wednesday's vote was 352-64, with all the opposition coming from Democrats.
"The only reason this bill is not paid for is because Republicans almost in lockstep in both bodies have prevented us," said Rep. Steny Hoyer of Maryland, the majority leader, in one of several furious speeches by Democrats on the House floor.
"We are forced today to recognize that we don't have the votes to pursue the pay-as-you go principle that we adopted in a bipartisan fashion," Hoyer said. "I regret this day and this bill."
The White House, however, cheered the plan. "We're pleased that today Congress was finally able to pass legislation, without raising taxes," the press secretary, Dana Perino, said in a statement. "The AMT was never intended to hit these middle-class taxpayers, and the last thing they or the U.S. economy needs is a tax increase."
From New York Times:
WASHINGTON -- Congress on Wednesday gave final approval to a plan that will spare millions of middle-class Americans higher tax bills for 2007 -- about $2,000 on average. The White House welcomed the development and said President Bush would sign the bill, even as it took a swipe at Congress, saying the late action by lawmakers might cause delays in refunds for up to 38 million filers.
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 citizens 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 4 million who paid it on 2006 income, according to the White House. Many of the beneficiaries of the AMT fix are people with incomes in the $75,000 to $200,000 range.
The alternative minimum tax requires taxpayers -- generally those who deduct items such as high medical expenses and state and local taxes and who claim credits for dependents -- to make separate calculations and pay the one producing the higher figure.
Treasury Secretary Henry Paulson, while thanking the House for approving the bill, warned that there would likely be some delays "including delays of some refunds." Changes in the tax code require substantial work, especially in reprogramming IRS computers.
Officials on Wednesday said they could not project how many taxpayers might be affected by delays. Previously the IRS had said that a delay in congressional action until Christmas could stall as many as 38 million tax returns corresponding to $87 billion in refunds.
The IRS said that within 72 hours it would post on its Web site revisions to a dozen forms affected by the change.
The vote on the alternative tax plan came on the final day of the first session of the 110th Congress, which ended with a burst of last-minute legislation including final adoption by the House of a $555 billion budget package. But it was the tax plan that gave a discordant note to the last day before the holiday recess.
House Democrats angrily approved the bill after giving in to demands by congressional Republicans and Bush that the tax cut not be offset by raising other taxes. Democrats started out the year by pledging to pay for the $50 billion cost of the AMT fix with cuts in spending or increases in taxes elsewhere.
The Democrats repeatedly tried to get Senate Republicans to back a plan that would have paid for the cut by imposing new taxes, particularly on wealthy hedge fund managers.
But the Republicans refused, leaving Democrats little choice but to break their promise. By not offsetting the cost, the U.S. debt will rise by $50 billion.
Wednesday's vote was 352-64, with all the opposition coming from Democrats.
"The only reason this bill is not paid for is because Republicans almost in lockstep in both bodies have prevented us," said Rep. Steny Hoyer of Maryland, the majority leader, in one of several furious speeches by Democrats on the House floor.
"We are forced today to recognize that we don't have the votes to pursue the pay-as-you go principle that we adopted in a bipartisan fashion," Hoyer said. "I regret this day and this bill."
The White House, however, cheered the plan. "We're pleased that today Congress was finally able to pass legislation, without raising taxes," the press secretary, Dana Perino, said in a statement. "The AMT was never intended to hit these middle-class taxpayers, and the last thing they or the U.S. economy needs is a tax increase."
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