Small Business Taxes & ManagementTM--Copyright 2007, A/N Group, Inc.
The Joint Committee on Taxation has prepared a report Present Law and Background Relating to the Individual Alternative Minimum Tax. We think you'll find the tables in that report of interest. The table immediately below (Percentage of Taxpayers Affected by AMT) shows the percent of taxpayers that are projected to be affected by the AMT through the year 2017. The table shows an increase through 2010, then a drop followed by an increase. The drop is the result of the expiration of the lower tax rates enacted in 2001. Since the rates on the regular tax will increase, the number of taxpayers subject to the alternative minimum tax will decrease, at least temporarily.
The second line of that table shows the percentage of individual income tax generated by the AMT as a percentage of the total individual tax liability. It jumps from 2.5% in 2006 to 6.7% in 2007 and continues to increase through 2010. It's no wonder Congress is having difficulty addressing the problem. Simply eliminating the tax would cause tax revenues to fall significantly.
But even the 17.9% subject to the tax in 2010 doesn't convey the impact. The second set of tables (The Distribution of Taxpayers Affected by the AMT by Filing Status Projections for Tax Years 2006, 2007, and 2010) shows how the tax affects taxpayers in different income classes and with different filing status. As we discussed in an earlier article, your chances of getting hit with the AMT are greatest if you're AGI (adjusted gross income) is between $100,000 and $500,000. In 2006 a taxpayer with AGI of between $75,000 and $100,000 had a 1.6% chance of seeing the AMT on his return. That increased to 10.2% for someone in the $100,000 to $200,000 AGI range and to 74% in the $200,000 to $500,000 range (notice the range used for the computation is larger). (Keep in mind that these percentages represent taxpayers in the group affected. The dollar amounts can vary widely. For example, a taxpayer could have an AMT liability of $50 and still affect the percentage.)
But in just one year the percentages jump. In 2007 49% of taxpayers in the $75-$100,000 AGI range will be subject to the AMT. And even 12.5% of taxpayers in the $50-$75,000 range would be subject to the tax. Almost no one in the $200-$500,000 AGI range escapes the tax (95.3% are projected to be subject to it). Those numbers are for all taxpayers, regardless of filing status. If you're married with children, it's actually worse.
For 2007, the basic exemption for the AMT has reverted to its lower prior-law levels and nonrefundable personal tax credits are not allowed against the AMT. As a result, there will be a significant increase in the number of taxpayers subject to the AMT, and there will also be a significant change in the types of taxpayers who will be subject to the AMT. The potential distributional effects of the AMT are summarized below.
Percentage of Taxpayers Affected by AMT
Tax Years 2006-2017
2006 2007 2008 2009 2010 2011 2012 2013 2014 2105 2016 2017
Percentage of
Taxpayers 2.5% 13.8% 15.1% 16.5% 17.9% 10.4% 11.8% 13.1% 14.5% 16.1% 17.8% 19.4%
AMT liability and
lost credits as %
of total tax 2.5% 6.7% 7.6% 8.1% 9.1% 2.9% 3.3% 3.6% 3.9% 4.2% 4.6% 4.9%
The Distribution of Taxpayers Affected by the AMT by Filing Status
Projections for Tax Years 2006, 2007, and 2010
Tax Year 2006
All Taxpayers Single Taxpayers
% of taxpayers % of taxpayers
AMT affected AMT affected
+ lost by the + lost by the
Adjusted Gross Income Returns credits AMT Returns credits AMT
Less than $20,000 25 $294 0.0% 22 $69 0.0%
$20,000 - $40,000 7 $18 0.0% 6 $9 0.0%
$40,000 - $50,000 17 $27 0.2% 3 $8 0.1%
$50,000 - $75,000 96 $140 0.5% 28 $45 0.5%
$75,000 - $100,000 177 $290 1.6% 29 $59 1.4%
$100,000 - $200,000 1,259 $3,295 10.2% 202 $602 13.3%
$200,000 - $500,000 2,302 $13,224 74.0% 261 $1,741 67.8%
$500,000 - $1,000,000 275 $3,782 47.3% 32 $394 44.4%
$1,000,000 and above 80 $3,880 23.1% 13 $550 28.9%
Total 4,237 $24,949 2.5% 595 $3,476 0.7%
Tax Year 2007
All Taxpayers Single Taxpayers
% of taxpayers % of taxpayers
AMT affected AMT affected
+ lost by the + lost by the
Adjusted Gross Income Returns credits AMT Returns credits AMT
Less than $20,000 24 $298 0.0% 20 $70 0.0%
$20,000 - $40,000 169 $80 0.5% 13 $10 0.1%
$40,000 - $50,000 443 $264 4.0% 32 $33 0.7%
$50,000 - $75,000 2,477 $1,812 12.5% 177 $211 2.8%
$75,000 - $100,000 5,670 $6,301 49.0% 185 $297 8.5%
$100,000 - $200,000 10,794 $28,158 81.0% 601 $1,581 35.9%
$200,000 - $500,000 3,236 $28,098 95.3% 324 $2,394 80.6%
$500,000 - $1,000,000 303 $4,178 49.8% 32 $416 43.2%
$1,000,000 and above 81 $4,122 22.3% 12 $567 26.7%
Total 23,197 $73,311 13.8% 1,396 $5,579 1.6%
Tax Year 2010
All Taxpayers Single Taxpayers
% of taxpayers % of taxpayers
AMT affected AMT affected
+ lost by the + lost by the
Adjusted Gross Income Returns credits AMT Returns credits AMT
Less than $20,000 26 $341 0.0% 22 $81 0.0%
$20,000 - $40,000 188 $78 0.6% 10 $11 0.1%
$40,000 - $50,000 635 $428 5.5% 53 $54 1.0%
$50,000 - $75,000 3,649 $3,128 17.4% 265 $331 3.4%
$75,000 - $100,000 6,973 $9,929 52.9% 250 $411 8.0%
$100,000 - $200,000 14,447 $43,817 85.6% 954 $2,452 41.8%
$200,000 - $500,000 4,326 $46,747 98.1% 487 $3,838 90.4%
$500,000 - $1,000,000 537 $8,061 70.9% 49 $724 54.4%
$1,000,000 and above 138 $6,934 31.5% 20 $934 35.7%
Total 30,920 $119,463 17.9% 2,109 $8,835 2.3%
Tax Year 2006
Married Taxpayers Married Taxpayers
with no Children with Children
% of taxpayers % of taxpayers
AMT affected AMT affected
+ lost by the + lost by the
Adjusted Gross Income Returns credits AMT Returns credits AMT
Less than $20,000 1 $138 0.0% 2 $81 0.0%
$20,000 - $40,000 0 $1 0.0% 0 $3 0.0%
$40,000 - $50,000 5 $16 0.2% 5 $3 0.2%
$50,000 - $75,000 13 $14 0.2% 16 $30 0.3%
$75,000 - $100,000 35 $70 0.9% 48 $85 1.0%
$100,000 - $200,000 225 $882 4.8% 690 $1,457 11.8%
$200,000 - $500,000 733 $4,369 63.9% 1,252 $6,769 82.6%
$500,000 - $1,000,000 123 $1,679 52.3% 116 $1,627 44.1%
$1,000,000 and above 41 $1,765 28.5% 24 $1,495 15.9%
Total 1,175 $8,935 4.0% 2,153 $11,549 7.4%
Tax Year 2007
Married Taxpayers Married Taxpayers
with no Children with Children
% of taxpayers % of taxpayers
AMT affected AMT affected
+ lost by the + lost by the
Adjusted Gross Income Returns credits AMT Returns credits AMT
Less than $20,000 1 $141 0.0% 2 $80 0.1%
$20,000 - $40,000 33 $9 0.7% 46 $37 1.0%
$40,000 - $50,000 118 $72 5.2% 73 $61 3.4%
$50,000 - $75,000 296 $214 5.2% 1,019 $618 17.8%
$75,000 - $100,000 1,772 $1,402 42.3% 3,230 $3,928 70.8%
$100,000 - $200,000 3,776 $7,134 75.2% 6,051 $18,354 97.0%
$200,000 - $500,000 1,214 $9,759 96.4% 1,635 $15,438 98.1%
$500,000 - $1,000,000 132 $1,823 54.1% 133 $1,847 47.7%
$1,000,000 and above 42 $1,904 27.8% 25 $1,580 15.5%
Total 7,384 $22,459 25.1% 12,214 $41,942 41.8%
Tax Year 2010
Married Taxpayers Married Taxpayers
with no Children with Children
% of taxpayers % of taxpayers
AMT affected AMT affected
+ lost by the + lost by the
Adjusted Gross Income Returns credits AMT Returns credits AMT
Less than $20,000 2 $152 0.0% 2 $100 0.1%
$20,000 - $40,000 42 $11 0.9% 51 $29 1.2%
$40,000 - $50,000 134 $78 6.6% 74 $82 3.6%
$50,000 - $75,000 587 $387 10.5% 1,307 $1,036 26.2%
$75,000 - $100,000 2,348 $2,183 51.4% 3,535 $6,048 78.7%
$100,000 - $200,000 5,454 $12,021 85.4% 7,491 $27,513 98.2%
$200,000 - $500,000 1,601 $15,866 98.5% 2,153 $26,152 99.5%
$500,000 - $1,000,000 222 $3,410 73.5% 256 $3,793 73.4%
$1,000,000 and above 67 $3,252 36.6% 49 $2,629 25.8%
Total 10,456 $37,358 34.4% 14,919 $67,381 50.5%
Tax Year 2006
Head of Household
% of taxpayers
AMT affected
+ lost by the
Adjusted Gross Income Returns credits AMT
Less than $20,000 0 $7 0.0%
$20,000 - $40,000 0 $5 0.0%
$40,000 - $50,000 4 $1 0.2%
$50,000 - $75,000 39 $50 2.1%
$75,000 - $100,000 65 $76 11.0%
$100,000 - $200,000 142 $353 40.2%
$200,000 - $500,000 56 $345 90.3%
$500,000 - $1,000,000 4 $82 36.4%
$1,000,000 and above 2 $70 28.6%
Total 314 $989 1.5%
Tax Year 2007
Head of Household
% of taxpayers
AMT affected
+ lost by the
Adjusted Gross Income Returns credits AMT
Less than $20,000 0 $7 0.0%
$20,000 - $40,000 77 $24 1.0%
$40,000 - $50,000 221 $99 13.0%
$50,000 - $75,000 986 $769 46.0%
$75,000 - $100,000 483 $674 75.5%
$100,000 - $200,000 367 $1,088 92.7%
$200,000 - $500,000 62 $507 93.9%
$500,000 - $1,000,000 5 $91 41.7%
$1,000,000 and above 2 $71 28.6%
Total 2,202 $3,331 10.5%
Tax Year 2010
Head of Household
% of taxpayers
AMT affected
+ lost by the
Adjusted Gross Income Returns credits AMT
Less than $20,000 0 $9 0.0%
$20,000 - $40,000 85 $27 1.0%
$40,000 - $50,000 375 $213 19.8%
$50,000 - $75,000 1,491 $1,374 57.6%
$75,000 - $100,000 840 $1,287 85.9%
$100,000 - $200,000 549 $1,831 94.2%
$200,000 - $500,000 85 $892 98.8%
$500,000 - $1,000,000 9 $135 56.3%
$1,000,000 and above 2 $120 25.0%
Total 3,436 $5,889 15.7%
Copyright 2007 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject.--ISSN 1089-1536
--Last Update 06/28/07