AMT Could Hit 27 Million Taxpayers in 2010

One in every six taxpayers could be subject to the alternative minimum tax this year, a far higher proportion than last year, according to the Congressional Budget Office.

Approximately 4.5 million taxpayers were affected by the AMT in 2009. The number has been kept relatively low by annual modifications to the AMT rules, known as the AMT patch, which Congress has dutifully passed year after year. However, the most recent modifications expired at the end of calendar year 2009, the CBO noted.

Thus, approximately 27 million taxpayers could be facing the AMT in 2010, paying on average an additional $3,900 in tax. “Nearly every married taxpayer with income between $100,000 and $500,000 will owe some alternative tax,” said a posting on the CBO Director’s Blog.

Joshua Shakin of the CBO’s Tax Analysis Division has released a report on the expanding scope of the AMT, the changes in the types of taxpayers affected by the tax, and the choices available for remedying the problem. Possible options include indexing the AMT’s parameters for inflation, allowing additional deductions and exemptions under the AMT, and eliminating the AMT altogether.

Of course, eliminating the AMT completely would also severely deplete the federal government’s tax revenue. Congress will need to get to work again on yet another patch, and quickly.