AMT Coverage by State, 2007

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Reprinted with permission of Tax Analysts.

The complete article with the table is available in PDF format.

Abstract

Many taxpayers must calculate their federal income tax liability under two sets of rules: those applying to the regular income tax and those of the alternative minimum tax. If a taxpayer owes more tax under the alternative rules, then the difference is paid as AMT. The AMT hits people in some states harder than it does in others because state and local income and property taxes are not allowed as itemized deductions against the AMT and because income varies across states. This column discusses AMT participation rates by state.

Introduction

Many taxpayers must calculate their tax liability under two sets of rules: those applying to the regular income tax and those under the alternative minimum tax. If they owe more tax under the alternative rules, then the difference is paid as AMT. The AMT hits people in some states harder than others. State and local income and property taxes are allowed as itemized deductions against the regular income tax, but not against the AMT. As a result, taxpayers in states that rely more heavily on income taxes are more likely to be on the AMT than taxpayers in other states. A temporary provision (expiring at the end of 2009) also allowed taxpayers to elect to deduct sales taxes, rather than income taxes, in 2007. States also vary based on the income of their residents. Higher-income people are more likely to be on the AMT because households with incomes below the AMT exemption ($66,250 for couples and $44,350 for singles in 2007) are not subject to the tax, and the AMT exemption phases out at incomes exceeding $150,000 ($112,500 for single filers).

(End of text. The complete article with the table is available in PDF format.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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