Tax Tip: The Alternative Minimum Tax Fix
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iStockphoto/Thinkstock(NEW YORK) — In recent years, many people have worried about tax creep, or paying a potentially higher bill because of the alternative minimum tax, which was originally designed to make sure wealthy people paid their “fair share.”
“The way things have operated in recent years, Congress has had to pass short term extensions, or patches, as they were usually called. The new legislation addressed that in a more permanent way,” Eric Smith of the Internal Revenue Service explains.
What Congress did recently is fix the problem of more middle class people being hit each year.
“The tax rate on the alternative minimum tax was indexed to inflation, which basically solved the problem that we faced every single year and that Congress had to adjust it,” explains Bob Meighan of TurboTax.
“That means,” Meighan adds, “that 30 million Americans who would have been impacted by the Alternative Minimum Tax won’t have to worry about it.”
They’re saving thousands of dollars a year because of that fix. The thresholds will be indexed in the future.
Copyright 2013 ABC News Radio