Gerber Life Family Times --- News and tips for familes of all ages and stages of life

The Alternative Minimum Tax  
Does it impact you?


The Alternative Minimum Tax
Does it impact you?

Understanding a mysterious disorder of childhood.

Snowflakes Are Falling!
A paper snowflake project.

An ounce of prevention in a simple shot.

Gerber Life Family Times Archive

FinancialWhat more can be said about taxes? They are a part of our lives that (at least in the foreseeable future) won't be going away. Now that the year of 2007 is behind us, the countdown begins to April 15, 2008—the deadline for filing 2007 income taxes. By now you may have heard that this year millions of taxpayers "dodged a bullet" when the U.S. House of Representatives, on December 21, 2007, passed an Alternative Minimum Tax (AMT) "patch."

According to the Tax Foundation, the AMT was introduced in 1969 as a way to prevent a small group of high-income taxpayers from taking advantage of so many exemptions and deductions that they owed little or no income tax. The AMT acts as a parallel tax that identifies taxpayers who have taken excessive advantage of legal tax breaks and requires them to re-calculate their income tax—adding back some of the previously untaxed income. Those individuals then take a special AMT exemption and pay taxes on the new calculation of their taxable income at different rates of taxation.

FinancialThe problem with the AMT is that it is not adjusted for inflation and what was once meant to address a few would now apply to the majority in the middle class. The Congressional Budget Office states that, for most of its existence, the AMT has affected less than one percent of taxpayers in any year prior to 2000. But since it is not adjusted for inflation and because of the tax cuts implemented in 2001, the number of taxpayers who will be impacted by the AMT is projected to skyrocket. The Brookings Institute estimates that by 2010, the AMT will affect 33 million taxpayers (about one-third of all tax returns)—a significant increase over the 1 million affected by the AMT in 1999. The Brookings Institute adds that the AMT will be the "de fact tax system for households with incomes between $100,000 and $500,000," of which 93 percent will be impacted by the tax.

Although the AMT "patch" protects taxpayers on their 2007 tax returns, its late enactment will cause filing delays since tax software and tax forms were completed in November 2006 for the upcoming year. The Internal Revenue Service (IRS) estimates that as many as 13.5 million taxpayers using any of five forms related to the AMT legislation will have to wait to file returns until the IRS completes reprogramming its systems for the new law. The IRS has set February 11, 2008 as the potential starting date for taxpayers to begin submitting returns which include any of the five forms affected by the AMT legislation. The five forms affected by the AMT patch include:

  • Form 8863, Education Credits.
  • Form 5695, Residential Energy Credits.
  • Form 1040A's Schedule 2, Child and Dependent Care Expenses for Form 1040A filers.
  • Form 8396, Mortgage Interest Credit.
  • Form 8859, District of Columbia First-Time Homebuyers Credit.

Only tax return forms affected by the AMT change will require a filing delay. All other e-file and paper returns will be accepted by the IRS starting in January 2008.

For those who believe they may be affected by the AMT, the IRS offers an "AMT Assistant" online as part of the IRS website. The AMT Assistant is a simple test for those taxpayers who fill out their own tax returns to determine whether or not the AMT will impact their tax filing. Taxpayers simply answer a few simple questions about entries on their draft of the 1040 Form. The AMT Assistant will immediately determine either that you do not owe the AMT or that you need to go further to complete another form to find out if you owe the AMT. The AMT assistant can be found on the IRS website at

For the time being, we can breathe a little bit easier about what Uncle Sam expects from us this tax season. Then we will wait to see if the government makes a permanent change to the AMT, or if next year will bring another temporary fix.

As with any financial matters, consult with your financial planner or tax consultant regarding this or any other income tax issues.

Internal Revenue Service—
The Tax Foundation—
Congressional Budget Office—
The Brookings Institution—

Articles are provided for the general interest of our readers. Gerber Life Insurance is not responsible for any content and recommends that you consult the appropriate professional with any questions or concerns you may have concerning any financial or health related issues.

Back to top

Copyright ©2002-2016
Call toll-free 1-800-704-2180 or Email Us
Home Office: Gerber Life Insurance Company
White Plains, NY 10605
All rights reserved.

Gerber Life Home | Gerber Life Site Map

Disclosure | Privacy Statement | Copyright Information