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President Bush signed a one-year extension of the alternative minimum tax (AMT) patch on December 26, giving millions of taxpayers something to celebrate in the new year: relief from the AMT.
Without the extension, an estimated 25 million taxpayers would have faced an average of $2,000 more in their 2007 taxes, according to a statement from The White House.
Although the AMT was originally geared toward a small number of high-income taxpayers, some middle-income taxpayers are now subject to the tax.
Under the Tax Increase Prevention Act of 2007 (P.L. 110-166), the 2007 AMT exemption amounts were increased to $66,250 for married couples filing jointly (up from $62,550 in 2006), $33,125 for an individual filing separately (compared to $31,275), and $44,350 for single taxpayers and heads of households (up from $42,500).
If the new AMT patch had not been enacted, the exemption amounts would have reverted to $45,000, $22,500 and $33,750, respectively, according to the IRS.
The new legislation also includes a provision allowing taxpayers to continue using certain personal tax credits (e.g., the dependent care, Hope and lifetime learning credits) to offset the AMT.
Filing Delay Announced