Anyone considering marriage these days should be aware of the Alternative Minimum Tax (AMT). This tax generally affects taxpayers with $200K to $500K in taxable income, those who pay high real estate and other taxes, and those with children.
Created in 1969, the AMT isn’t indexed for inflation, so affects more and more taxpayers each year. The AMT hits married couples particularly hard. For the 2011 tax year, 6.1 percent of married couples will pay the AMT, according to one estimate. Married couples are nearly six times as likely as single taxpayers to trigger the AMT.
The victim list will grow even larger in 2012, if Congress does not enact what’s become an annual ritual of raising the threshold. Without the so-called “patch,” some 30 million Americans could qualify, including almost one in two married couples. You don’t know until you do your tax return whether it’ll affect you,” says Roberton Williams, a senior fellow at the Urban-Brookings center. “It’s always a case-by-case situation.” The AMT is “very unpredictable,” he adds.
The AMT hurts newlyweds for a simple reason: The various limits for couples are less than double those for single filers. That bite often comes on top of the marriage penalty under the ordinary tax.