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Why Your 2012 Tax Bill May Jump By $8,000

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AMT taxFrom Mitt Romney to Warren Buffett, people are clamoring for fairer taxes. But thanks to yet another lapse by our lawmakers in Washington, more than 20 million taxpayers may pay a tax that was originally designed to hit only the ultra-rich -- and the increase could cost you as much as $8,000.

When it was first designed, the alternative minimum tax, or AMT, was meant to make taxes more fair. The idea behind the AMT was to make sure that rich people didn't use deductions to zero out their taxes every year.

Because of inflation, though, the AMT threatens to snare more taxpayers every year. So far, Congress has always acted to pass a "patch" to keep those additional millions of taxpayers from having to pay AMT.

In this election year, though, getting any tax law through the House and Senate will be tough. And If lawmakers don't act, the Congressional Budget Office says that the average tax increase will be $3,900, with some paying more than $8,000 extra.

The worst part of not knowing whether you'll have to pay AMT in 2012 is that if you don't have enough tax withheld from your paycheck, you could end up owing interest and penalties.

What to Do

To be safe, you should consider either raising your withholding or planning to make estimated tax payments, which are due starting in April.

But you do have at least some control over whether and how much AMT you owe. Although the AMT is complicated and involves a host of calculations, the big item that hits most people who pay AMT is state and local tax, whether it's state income tax or the property taxes you pay on your home. Usually, you can deduct those tax payments, but the AMT doesn't allow it.

So if you're in a high-tax state and an AMT patch doesn't come soon, start thinking about whether you can spread those taxes out, paying some in 2012 and some in 2013. If you can, it could help keep you from wasting a potential deduction and getting stuck with the AMT.

More on taxes:

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Motley Fool contributor Dan Caplinger is hoping for an AMT patch, but he's not holding his breath. You can follow him on Twitter here.










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lakerieman

Would your statement "to make taxes more fair"indicate that fairness is a matter of degrees? A flat tax is fair. Graduated taxtion makes as much sense as graduated voting.
One man one vote, one man one tax..
If those amoung us who are successful are required to pay more we should also give them the privilege of additional votes so as to benefit from not only their money but also their successful insight.

February 11 2012 at 11:35 AM Report abuse rate up rate down Reply
n1yearocrapleft

when this *black cloud* muslim clown is removed from our white house in handcuffs ,so will his unconstitutional welfare *hell* care be abolished that he's trying to tax the death out of all americans with ~~REMEMBER 2012 WILL BE THE *CORRECTION ELECTION*. !

February 09 2012 at 8:24 PM Report abuse rate up rate down Reply
1 reply to n1yearocrapleft's comment
Sean Johnston

You are simply a insignificant piece of garbage NeoCon. Sorry, but when I see people as stupid as you allowed to throw your silly bigoted feces in the air, it should hit you in the face and teach you better. Your punishment is to live out the rest of your life being who you are, that'll teach you. Obama will WIN again, because the corruption and the hypocrisy of the GOP is festering. Research Phil Gramm's 2000 Commodities Exchange Act which took Gas Prices from 80 cents to Bush Regime's $ 4.00. Research James Sensenbrenner's Bankruptcy Act of 2005, which allowed Banks to Rape America, he also gave us The Patriot Act. Wait, I feel I just wasted 3 minutes trying to educate a Redneck Retard. I mean no disrepect to Retards.

February 09 2012 at 8:57 PM Report abuse -1 rate up rate down Reply
2 replies to Sean Johnston's comment
Stan

Please rersearch the Dem altenative to Bush Algore Who as far back as 1992 in his book Earth in the Balance advocated $5.00 a gallon gas prices.Then see all that the Dems and the greens have done to arrive at that price! The latest being the Keystone Pipeline!Nmot to mention the Jobs. Then research Who signed this Gramm act! The view and research the You Tube video of Clinton HUD sec. Cuomo telling how he was forcing banks to lend to people that would cause the banks to LOSE MONEY! Then explain to US retards how the Sensenbreener Act of 2005 caused the rape of America!
If you can! Compared with the You Tube comments of Cuomo!

February 10 2012 at 10:20 AM Report abuse rate up rate down
martie

If you mean no disrespect to so called retarts you should not have used the word because you were showing your own. That being said let us all be real its all our government and us not being making sure our voice are heard, we buy everything make everywhere and we are happy to give our money away, and even though other presidents have also made mistakes and were stupid too i have to say obama has been the worst my makes me feel insecure because he is always in bed with the devil..... and being redneck is not a bad thing maybe you should try it sometime God made us too.

April 08 2012 at 10:55 AM Report abuse rate up rate down
Steve Bell

Who are all of these 49% who pay NO TAXES? It sure as hell ain't me or anyone I know? What a load of BS....Just about as real as "Death Panels"!....How cam people believe this stuff?

February 09 2012 at 7:42 PM Report abuse rate up rate down Reply
1 reply to Steve Bell's comment
Stan

I gue3ss yo9u do not believe the IRS! We are of course talking INCOME TAX! RTeal simple take any 1040 and plug in the numbers and see what you get! Makes real east to stay in denial! Yeah and there are No tax increases in the Onbamacare =OOPs until they have to defend the mandates in court then they become taxes!

February 10 2012 at 10:24 AM Report abuse rate up rate down Reply
bummed1

I sure hope the $400 i made last year, thanks to the recession doesnt qualify for the AMT. Thank you, recession for another profitable year.

February 09 2012 at 7:01 PM Report abuse rate up rate down Reply
Aazoba Yuzuki

http://evanhoffman.com/evan/wp-content/uploads/2011/01/color-coded.png

looks like some from the lower 49% do pay taxes after all

February 09 2012 at 5:28 PM Report abuse +1 rate up rate down Reply
Richard

Fairer taxes! Unlikely, as the top 5% of wage earners already pay the majority of our taxes and the lower 49% pay NOTHING. To Obama - you can't get blood out of a turnip.

February 09 2012 at 4:14 PM Report abuse -2 rate up rate down Reply
Jane Marek

This story appears to mot be much more than a bunch of scare tactics and droole.

Where are the income brackets defined as to who will be effected? The 2011 tax laws have been out for almost 15 months this reporter could have easily gotten the facts. Defining it as "you may have to pay more" is like saying you may win the lottery, or ou may get more assigmnet because you write droole articles.

Honestly stories like this only fuel the ignorant and leave you guessing waht is true per say.

February 09 2012 at 1:30 PM Report abuse +5 rate up rate down Reply
1 reply to Jane Marek's comment
billnritahouse

The media is always trying to stir people up with something. Where do they come up with these lame stories?

February 09 2012 at 7:30 PM Report abuse +1 rate up rate down Reply
lorisotr

you forgot thr background
the amt was passes by congress in 60's because something like 400 millionairs in the US didn't pay any federal taxes
one year
so leave it to the politicians to fix everything, I don't think so

February 08 2012 at 9:20 PM Report abuse rate up rate down Reply
bmenides

The bubble of assets starting in 2007 was mainly caused by the dramatic collapse in residential housing. Government policy,and the belief that housing prices would continue to rise were two of the main culprits.

February 08 2012 at 4:55 PM Report abuse +1 rate up rate down Reply
Mike

tjdwill02
You're correct that am asset bubble was created on Wall Street . It started by exempting federally chartered savings banks, installment plan sellers and chartered loan companies from state usury limits. This effectively overrode all state and local usury laws and we dismantled the most ancient of human laws, the law against usury, which had existed in some form in every civilization from the time of the Babylonian Empire to the end of Jimmy Carter's term. It addicted the financial sector to very, very, very high rates of return compared to what investors were used to getting in the real economy, the manufacturing sector, General Motors, which would give piddling five, six, seven percent returns. This is a big problem in an era of hyperactive credit and lending, because the workers actual wage growth stagnates . So now you think that raising taxes on 78 million soon to be retired baby boomers, counting on dividends for funding is a good idea, now that they have lost 30% + equity in their home ?

21 hours ago Report abuse Permalink -1 rate up rate down Reply
1 reply to tjdwill02's comment

Mike
am? prof cranky pants. More of that top notch libtard education? Jimmy Carter was NEVER president of the Babylonian empire. Me thinkest thow art full of bolonian.

February 08 2012 at 2:57 PM Report abuse rate up rate down Reply