With AMT fix, taxpayers can breathe easier

Most taxpayers can file beginning Jan. 30; some must wait till late February.
Pablo Martinez Monsivais/Associated Press
Most taxpayers can file beginning Jan. 30; some must wait till late February.

Taxpayers can breathe a sigh of relief.

The alternative minimum tax, or AMT, has been patched — permanently — and several tax credits and deductions that technically expired at the end of 2011 were extended as part of the fiscal cliff compromise.

‘‘It certainly puts back into place many of the tax benefits that had expired for many people,’’ said Mark Steber, chief tax officer at Jackson Hewitt Tax Services. ‘‘The extenders will be back on people’s tax returns, making their 2012 refunds larger than they would have been.’’


But there may be confusion among some taxpayers about what credits and deductions still exist. That could make going it alone costly. Experts say people should seek guidance, whether from a professional tax preparer or up-to-date software programs, before filing their returns.

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The IRS will begin accepting returns Jan. 30, an eight-day delay necessitated by the late congressional action on the fiscal cliff.

‘‘We have worked hard to open tax season as soon as possible,’’ Acting Commissioner Steven T. Miller said. ‘‘This date ensures we have the time we need to update and test our processing systems.’’

Most taxpayers can file beginning Jan. 30. But those claiming energy credits, depreciation of property, or general business credits will have to wait until late February or March.


Nearly 104 million people received refunds last year, totaling about $283 billion. The average refund was $2,707, slightly less than the year before, according to the IRS.

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As people sit down to do their taxes, they’ll find that the standard deduction has been adjusted higher for inflation, to $11,900 for married couples filing jointly, $8,700 for heads of households, and $5,950 for single taxpayers.

About two-thirds of taxpayers claim the standard deduction, said Barbara Weltman, an author of J.K. Lasser’s Tax Guide 2013.

Each exemption is worth $3,800 this year, up from $3,700 in 2011. Look expansively at dependents beyond your children under 19, or 24 if in college. For example, if you’re paying more than half the support for your parents and their taxable income is less than the $3,800 exemption, you might be able to claim them as dependents even if they’re not living in your home.


‘‘When we say income over the exemption amount, we mean taxable income,’’ said Jackie Perlman, with H&R Block’s Tax Institute. ‘‘If a parent’s only income is Social Security, chances are little or none of the Social Security will be taxable. Otherwise, very few people would get to claim a parent.’’

Single taxpayers with qualified children or relatives as dependents also may be able to use head of household filing status, which is more advantageous to the taxpayer.

Capital gains rates are unchanged from 2011 — a maximum of 15 percent for assets held more than a year.

And don’t forget planning for retirement. You can contribute up to $5,000 to a traditional individual retirement account — $6,000 for people age 50 and older — and reduce income by that amount. If you haven’t made a contribution yet, there’s still time. You have until April 15, the tax filing deadline.

Be aware, however. Many deductions and credits phase out at higher incomes.

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Dozens of credits and deductions that affect 2012 taxes had been due to expire but were extended as part of the legislation that restored the Bush-era tax cuts for most taxpayers. The measure breathed new life into deductions for state and local sales taxes and an array of education-related credits and deductions. Not to mention the lack of an AMT patch.

The AMT was originally set up to make sure millionaires were paying taxes, but increasing numbers of middle-class taxpayers were being caught up in the AMT. The tax has been adjusted for inflation every year, but the last patch expired at the end of 2011. Without a new one, Miller said in a letter to Congress last fall, about 33 million taxpayers would have to pay the AMT in 2012, up from about 4 million in 2011.

Congress passed a permanent fix for the AMT. Going forward, it will be indexed according to inflation.

For 2012, the AMT exemption is $50,600 for unmarried individuals and $78,750 for joint filers.

‘‘It’s just not that they passed the threshold amount and indexed it for inflation,’’ said Kathy Pickering, executive director of H&R Block’s Tax institute. ‘‘The other nugget in there is that the nonrefundable credits are allowed.’’ That means filers subject to AMT may still be able to use these credits, if their income doesn’t exceed phaseout limits.

The fiscal cliff bill also extends the $1,000 per child tax credit, the expanded earned income tax credit, and the credit for adopting a child. Several education-related credits and deductions also were extended.

And taxpayers will have the choice of deducting state and local sales taxes instead of state and local income taxes.