Citizens for Tax Justice, a nonprofit research group, has projected the states where the highest percentage of residents will owe the alternative minimum tax if temporary exemptions are not extended.
As of Jan. 1, temporary higher exemptions from the individual AMT expired, though ongoing budget negotiations in Congress will probably see that exemption retroactively extended for at least another year.
According to Citizens for Tax Justice, if Congress and President Bush don't extend the temporary AMT relief, the number of taxpayers paying the AMT will jump by over 15 million in 2006. The analysis projects the number of 2006 AMT taxpayers in each state under current law (using the same exemptions that were in force before 2003), and under the current House and Senate plans to extend AMT relief.
The reports said that in six states -- New Jersey, Connecticut, New Hampshire, Massachusetts, Maryland and Wisconsin -- more than 20 percent of taxpayers would be subject to the AMT next year. In New Jersey, the hardest-hit state, 26 percent of all taxpayers would have to pay the tax. The state-by-state breakdown is available at the group's Web site, www.ctj.org/pdf/amtst0306.pdf.
The last permanent increase in the AMT exemption took effect in 1993, when the exemption for married couples was increased to $45,000. Temporary tax cuts enacted in 2003 increased the married exemption to $58,000 for the 2004 and 2005 tax years. Under current law, the exemption is set to drop back down to $45,000 in 2006.
The current patch proposed by the Senate would restore the AMT exemption to approximately its real 1993 value, while AMT reform in the House is a slight increase over the temporary 2005 exemption amount.
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