AMT Relief Provisions

The alternative minimum tax (AMT) is affecting more individuals with each passing year, and the comprehensive reform that Congress has promised still remains to be seen.  Instead, they have had a history of “patching” the AMT late in the year, and we expect a patch for 2008 before year-end.

Generally, the AMT is a separately computed tax that must be used if it exceeds the regular tax computation.  The AMT is a danger to taxpayers because many tax breaks (“preferences”) allowed for purposes of calculating regular taxes are disallowed for AMT purposes, and some types of income exempt from regular tax are added back to arrive at the tentative minimum tax.

As part of the Housing Assistance Act of 2008 and in an effort to help stimulate the sagging housing industry, Congress has provided some specialized AMT relief measures for individuals and businesses:

• Current tax rules provide an income tax credit for building low-income housing and another income tax credit for rehabilitating older buildings.  However, without the relief provided under the Housing Assistance Act, these tax credits cannot be used to offset the AMT.  Under this new law, the low-income housing credit claimed for buildings put into service after 2007, and the rehabilitation credit for post-2007 expenses, can both be used to offset the AMT.

• Interest on certain tax-exempt private activity bonds is taxed for AMT purposes even though it is tax-free for regular tax purposes.  The new law exempts from the AMT three special classes of bonds issued after July 30, 2008: (1) certain exempt facility bonds used at least 95% for qualifying residential rental projects; (2) qualifying mortgage bonds; and (3) qualifying veterans' mortgage bonds.

If you have any questions related to the new AMT provisions or the AMT itself, please give our office a call.

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