My Investing Notebook :: Learning from the pros; making decisions on my own. ::

In 1969, Congress noticed that some people with high gross income had a lot of deductions and therefore paid much less in tax than lower-income people who had few deductions. In an attempt to make the tax system fairer, Congress instituted the Alternative Minimum Tax (AMT). What it boils down to is this: if the AMT is greater than your regular tax, then you end up paying the AMT amount instead. The AMT has these effects:

* Expanding the amount of your income that can be taxed* Taxing items that are tax-free under the regular tax system* Disallowing many deductions

With the passing of the Jobs & Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), AMT exemption levels have been increased, reducing the number of taxpayers who are required to pay the AMT. Because lower tax rates mean your regular tax is more likely to be less than your AMT, the increased exemption amounts are particularly good news. The increased exemptions will protect taxpayers who otherwise would be subject to the AMT because of the lowered regular tax rates enacted by JGTRRA.

Exemption increases are:

This change is currently scheduled to be effective in 2003 and 2004.

[Excerpt from Quicken.com TurboTax Letter]