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Alternative Minimum Taxpayers by State: 2005, 2006, and Projections for 2008, July 15, 2008 1 (July 15, 2008)

handle is hein.tera/crstax0004 and id is 1 raw text is: Order Code RS22083 Updated July 15, 2008 A CRS Report for Congress Alternative Minimum Taxpayers by State: 2005, 2006, and Projections for 2008 Steven Maguire Specialist in Public Finance Government and Finance Division Summary Personal exemptions, itemized deductions for state/local taxes, and miscellaneous itemized deductions account for 96% of the preference items that are subject to tax under the alternative minimum tax (AMT) but not subject to tax under the regular income tax. As a result, over certain income ranges, taxpayers who claim itemized deductions for state/local taxes, miscellaneous deductions, or have large families are more likely to fall under the AMT than taxpayers who do not have these characteristics. In 2006, 4.1 million taxpayers were subject to the AMT. New Jersey, Connecticut, New York, the District of Columbia, and Maryland had the highest percentage of taxpayers subject to the AMT. South Dakota, Tennessee, Alaska, Mississippi, and North Dakota had the lowest percentage of taxpayers subject to the AMT. In 2008, absent legislative change, according to the Joint Committee on Taxation, some 25.7 million taxpayers will be affected by the AMT. At that time, whether a married taxpayer has itemized deductions for state/local taxes or miscellaneous deductions will become a much less important factor than it is at present in determining AMT coverage. This occurs because, whether they itemize their deductions or not, married taxpayers across a wide range of the income spectrum will be subject to the AMT because personal exemptions are not allowed against the AMT. This report will be updated as legislative action warrants or as new data become available. The alternative minimum tax for individuals (AMT) was originally enacted to ensure that high-income taxpayers paid a fair share of the federal income tax. However, the lack of indexation of the AMT coupled with the recent reductions in the regular income tax has greatly expanded the potential impact of the AMT.1 See CRS Report RL30149, The Alternative Minimum Tax for Individuals, by Steven Maguire. Congressional Research Service The Library of Congress Prepared for Members and Committees of Congress

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