The Alternative Minimum Tax (AMT) is an additional tax that some taxpayers have to pay on top of their regular income tax.  Furthermore, AMT was originally designed to make sure that high income individuals did not evade taxation.  For awhile, the AMT worked as intended.  However, AMT was not indexed for inflation, which has seemingly “trapped” middle income taxpayers in recent years.
Currently, Congress has no plans to repeal the AMT because of the economic impact that would result.  Rather than repealing the AMT act, Congress has annually created a "patch" to AMT, which partially alleviates this increased tax burden.  The patch increases exemption amounts and provides other means of relief.  However, The American Recovery and Reinvestment Tax Act of 2009 provided a patch for 2009 only.  The Taxpayer Certainty and Relief Act of 2009 is a proposal floating around Congress to extend the AMT patch annually over the next 10 years at the 2009 levels and index it for inflation.  However, until a decision is made, almost any taxpayer is a potential target for AMT.

Below is a list of the Top 10 Things that Cause AMT Liability  (source: Fairmark.com):

• Personal Exemptions
• Standard Deduction
• State and Local Taxes
• Medical Expenses
• Miscellaneous Itemized Deductions
• Various Credits
• Incentive Stock Options
• Long-Term Capital Gains
• Tax-Exempt Interest
• Tax Shelters

You are probably asking yourself, “Should I worry about AMT at my income levels?” Unfortunately, there is no clear answer to this question, and determining your AMT can be complicated. Consulting a tax professional for proper tax planning and strategies to avoiding AMT in 2010 and future years will assist you in determining the best answer to fit your situation.  Our firm has experience in developing tax planning strategies to reduce AMT, and we can assist you with this analysis.  In addition, the Internal Revenue Service offers an online calculator to assist taxpayers in determining if they are subject to AMT (http://www.irs.gov/businesses/small/article/0,,id=150703,00.html).