Alternative Minimum Tax (AMT) / Hybrid Tax Credit Change

[lee]

I just read the following information about the new tax legislation Bush is about to sign (excerpt from CNNMoney.com: How the tax bill affects you):

In addition, when calculating whether they're subject to AMT, taxpayers will be allowed to use all nonrefundable personal credits to offset AMT liability. Normally, these credits often end up being disallowed under AMT.[/b]

I'm not an expert, but I read this to mean that the Hybrid Vehicle tax credit will, after all, be useful to those taxpayers that are subject to AMT.

If it's true, that's a bit of a bummer for me. I rushed to buy at the end of 2005 because I read that I would not be able to use the 2006 tax credit, but was able to use the much smaller 2005 clean fuel tax deduction.

Assuming I'm reading this correctly, this is GREAT news for those of you who bought in 2006, but were told that you wouldn't qualify for some or all of the tax credit because you pay AMT.

[Kiloran]

Great. Another tax cut for the wealthy.

[dipper]

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 10:18 AM) [snapback]256340[/snapback]</div>

Great. Another tax cut for the wealthy.
[/b]

Talk to the people paying AMT and still having to work like a horse to support their family.

In 10 years, everyone not under poverty line will have to pay AMT...

[Kiloran]

<div class='quotetop'>QUOTE(dipper @ May 16 2006, 01:27 PM) [snapback]256343[/snapback]</div>

Talk to the people paying AMT and still having to work like a horse to support their family.

In 10 years, everyone not under poverty line will have to pay AMT...
[/b]

The law is written to allow the non-refundable tax credits for everybody, not just working folk recently affected by the fact that the AMT is not indexed for inflation.
The vast majority of the benefit of this aspect of the tax cut will be enjoyed by the wealthy (again).

[Amyshubby]

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 01:34 PM) [snapback]256348[/snapback]</div>

The vast majority of the benefit of this aspect of the tax cut will be enjoyed by the wealthy (again).
[/b]

I'm not a tax expert, but I can tell you that the AMT would have hurt most of the middle class people in my geographic location. We have oppressively high property taxes and not being able to take the deduction would have been a back-breaker.

Just on the basis of my Prius alone, I will get back $5200 as a tax credit now that I wont be subject to the AMT. I would not have been able to afford the car without getting back this money.

Yes, the tax breaks might help the wealthy, but they can also help the people they are intended to help. This accomplishes its goal.

Of course, I am extremely biased in this matter because of how much I would have suffered if I was subject to the AMT.

[Kiloran]

<div class='quotetop'>QUOTE(Amyshubby @ May 16 2006, 03:21 PM) [snapback]256423[/snapback]</div>

I'm not a tax expert, but I can tell you that the AMT would have hurt most of the middle class people in my geographic location. We have oppressively high property taxes and not being able to take the deduction would have been a back-breaker.

Just on the basis of my Prius alone, I will get back $5200 as a tax credit now that I wont be subject to the AMT. I would not have been able to afford the car without getting back this money.

Yes, the tax breaks might help the wealthy, but they can also help the people they are intended to help. This accomplishes its goal.

Of course, I am extremely biased in this matter because of how much I would have suffered if I was subject to the AMT.
[/b]

You had no guarantee that the AMT would change and you bought a car you couldn't afford without it?

The purpose of the AMT was to prevent the weathy from using deductions and credits to get out of paying their fair share of taxes.
Making non-refundable credits available to them again goes a long way toward giving those loopholes back.

Keep in mind, the legislators didn't have to write this in such a way as to disproportionately give money to the wealthy, they chose to write it that way.
It would have been very easy to index the AMT to inflation or some other reasonable method to keep the middle class from being subject. (You'll notice that this is exactly what they did not do.)

[dipper]

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 12:33 PM) [snapback]256427[/snapback]</div>

You had no guarantee that the AMT would change and you bought a car you couldn't afford without it?

The purpose of the AMT was to prevent the weathy from using deductions and credits to get out of paying their fair share of taxes.
Making non-refundable credits available to them again goes a long way toward giving those loopholes back.

Keep in mind, the legislators didn't have to write this in such a way as to disproportionately give money to the wealthy, they chose to write it that way.
It would have been very easy to index the AMT to inflation or some other reasonable method to keep the middle class from being subject. (You'll notice that this is exactly what they did not do.)
[/b]

Why can't we have flat tax already?

I also hate hybrid owners getting tax breaks too....

[Kiloran]

We don't need a flat tax to eliminate deductions and credits.
Deductions and credits are just mechanisms to hide government spending.

[efusco]

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 02:48 PM) [snapback]256440[/snapback]</div>

Deductions and credits are just mechanisms to hide government spending. [/b]

What? That makes no sense what so ever. Tax credits and Tax deductions have nothing to do with gov't spending.

And as far as your hostile comments toward the wealthy and tax breaks you make make mention of "paying their fair share". If we made you king and you could decide, what would be the 'fair share' for a person making say $250k/yr before any taxes?

What about someone making $125k
$75k
$50k
$25k
$15k

[Kiloran]

<div class='quotetop'>QUOTE(efusco @ May 16 2006, 04:04 PM) [snapback]256453[/snapback]</div>

What? That makes no sense what so ever. Tax credits and Tax deductions have nothing to do with gov't spending.

And as far as your hostile comments toward the wealthy and tax breaks you make make mention of "paying their fair share". If we made you king and you could decide, what would be the 'fair share' for a person making say $250k/yr before any taxes?

What about someone making $125k
$75k
$50k
$25k
$15k
[/b]

There is no bottom line difference between the government passing a spending bill to send me a check for say $100 and the government opting to exempt me from $100 in taxes.
In the end, I have $100 more and the government has $100 less so the two actions are equivalent.

The AMT is commonly characterized in more or less the same words I used by those who enacted it.

From: http://www.reformamt.org/reasons.php, an organization dedicated to AMT reform.
C. Alternative Minimum Tax

Both the Alternative Minimum Tax and its predecessor, the Add-on Minimum Tax, were intended to require all taxpayers to pay their fair share of taxes. The concern expressed by Congress was that wealthy taxpayers, because of their wealth and access to resources, were able to employ tax strategies or invest in tax shelters that allowed them to reduce or practically eliminate their income taxes. This was seen as unfair and discriminated against people of ordinary means who then ended up paying a proportionately larger percentage of their income in taxes. What lawmakers had in mind in subjecting ISOs to AMT were wealthy, senior executives with high six- and seven-figure salaries who choose to take several million more in the form of ISOs.