John M. Hoffman & Associates CPAs

Frequently Asked Questions

Alternative Minimum Tax (AMT)

"So what does this AMT stuff all mean to me?"

One of our problems with the AMT is that it makes our tax system and our politicians guilty of false advertising. For all those folks in the AMT, they get no additional exemption for having dependent children. They don't get to deduct their state and local income taxes. And for the most part because of the AMT, they do not benefit from those tax cuts that you hear our President talking (as if he was so generous) about.

We don't want people who are "nicked" a little by the AMT to get to crazed. First and most important - what is the alternative? Are you going to move to Wyoming where there is no state income tax? You could still be part of Red Sox nation but the culture shock might be a killer. Are you going to put those children up for adoption because you get no tax benefit? We think not!

We like to think that the problem with the AMT is that regular tax rates are too low. With the government operating at a huge deficit, raising regular tax rates would raise some revenue and if regular tax rates were higher, fewer people would be subject to AMT. In that case taxpayers would be computing their taxes as advertised, where more taxpayers got relief from the expenses of raising a family or paying state income taxes. As the federal government forces more responsibilities down to state and local levels, those taxes go up and for those in the AMT, they get no benefit.

Solving the problem by lowering the AMT rate is not a solution because it would simply increase the deficit.