The alternative minimum tax, which grew from an effort to provide some level of taxation on those who used various tax-avoidance techniques into a monster that threatens to swallow the entire federal income tax system, is the subject of tax relief in the recently-signed stimulus legislation. The exemption from AMT is scheduled to fall each year and engulf many millions of taxpayers, unless a “patch” is applied. The patch temporarily increases the exemption, and is reenacted every year. In the stimulus legislation, the patch was increased to the following levels:

  • Single and head of household  $46,700
  • Married filing jointly  $70,950
  • Married filing separately  $35,475

The rates remain the same: 26% on the first $175,000 of AMT taxable income ($87,500 if married filing separately), and 28% on the balance.