Individual Alternative Minimum Tax Relief

The Act provides a significant increase in the alternative minimum tax exemption amounts for years 2003 and 2004. The exemption amounts are increased to:

  • $58,000 from $49,000 in 2003 and 2004 for married individuals filing jointly and surviving spouses
  • $40,250 from $35,750 in 2003 and 2004 for other unmarried individuals
  • $29,000 from $24,500 in 2003 and 2004 for married individuals filing separately

After 2004, the exemption amounts revert to prior-law amounts.

The temporary increase in the individual alternative minimum tax exemption amount does not increase the point at which the exemption begins to phase out: $150,000 on a joint return, $112,500 for unmarried individuals

KPMG Observation

The increased AMT exemptions allow many middle-income taxpayers to realize the full benefit from the regular tax rate reductions in 2003, in that the reductions are not merely offset by AMT. However, the temporarily increased exemptions do not resolve the long-term prospect that more taxpayers will be subject to AMT, and even more taxpayers will need to do an additional set of computations to determine if they are subject to AMT. The President and Congress may have deferred dealing with this issue, but it will resurface in the future.

Even with the increased AMT exemptions, some taxpayers in 2003 may move into an "AMT position" under the new tax rate regime (though they may still have a smaller aggregate tax burden than under prior law). Some taxpayers with large AMT adjustments and preferences may receive no benefit from the tax rate table adjustments (though they may receive some benefit from the new maximum tax rates on capital gains and dividends which also apply in computing AMT).



* All section references are to the Internal Revenue Code of 1986, as amended.
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Copyright © 2003 KPMG LLP, the U.S. member firm of KPMG International, a Swiss non-operating association. All rights reserved. The information contained in this report is general in nature and based on authorities that are subject to change. Applicability to specific situations is to be determined through consultation with your tax adviser. Privacy Policy :: Disclaimer