CLEVELAND -- A little known aspect of the looming "fiscal cliff" will hit 27 million families hard.
The Alternative Minimum Tax, or AMT, will cut deep into the middle class and cost millions of average families thousands more per year unless Congress and the White House act before the end of the year.
"People are unsuspecting of it," says tax expert Steven C. Hartstein, of Skoda Minotti. "It will hit them very hard because they don't expect it to be coming."
AMT was introduced in 1969 to make sure the very wealthy, who had many tax deductions, paid at least some minimum income tax. Since then, it was been indexed to keep up with inflation and other factors.
Those checks and balances, or patches, are set to expire on December 31, and if not renewed and updated, will doom 27 million more households to pay much higher income taxes.
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"The average family will pay an extra $3,700 in AMT," Hartstein predicts, "and if you make over $75,000, you will feel AMT this year."
He estimates that people with income of $40,000 per year could be affected, with nearly every family with a combined income of $75,000 almost certainly impacted.
"Those with much lower incomes would not be hit by AMT," the Skoda Minotti tax expert continued, "nor would people in the highest tax brackets. It's people in the middle who will pay."
In the estimation of Hartstein, who is also an adjunct professor at Case Western Reserve University's Weatherhead School of Management, there is not much taxpayers can do to plan for the AMT hit, if it comes.
"We are waiting to see what Washington does, just like everyone else."
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