AMT patch without revenue offsets

Last week the House approved the Senate-passed version of the "Tax Increase Prevention Act of 2007". President Bush is expected to sign the Act. It provides for a one-year patch of the AMT for 2007 but does not offset the revenue cost of the measure with revenue raising provisions.

Under the Act, the AMT exemption amounts for 2007 for individuals will increase from $66,250 for married individuals filing jointly and surviving spouses, up from $62,550 for 2006, $44,350 for unmarried individuals, up from $42,500 for 2006; and $33,125 for married individuals filing separately,up from $31,275 for 2006. It also allows the sum of personal nonrefundable credits (dependent care credit, elderly and permanently disabled credit, mortgage credit, etc) may offset both regular tax and AMT.

Keep in mind, this is only a temporary fix. Congress will still need to address the AMT exemption and the allowance to offset AMT taxes with credits during the 2008 session or the exemptions figures will revert back to the levels set in 2000 ($45,000, $33,750 and $22,500, respectively) and the offsets will go away.

So will they? It probably depends on your political viewpoint and whether they will fix what is sure to a problem for a growing number of taxpayers. One thing can be said, 2007 will result in less tax revenue as a result of the changes and some that were scheduled to creep into AMT will now stay out of this progressive tax. Unique to the passage of this Act is that it didn't involve increasing revenue or offsetting the lower tax with higher taxes in another area. It is widely runoreed that a more permanent fix to the AMT system would have to involve a higher capital gain tax rate - roughly back a 20% long-term rate.