Last week President Barack Obama and Vice President Joe Biden released their 2008 income tax returns. The President is not paying the AMT, but the Vice President is still stuck in it, as he has been for several years. We had seen this when they made their tax returns public during the presidential campaign.
Biden’s income is in the “wealthy” category, as defined by the President – those making over $250,000. But with total income of $269K, just barely over that threshold, it may seem odd that he would be subject to the AMT. Unfortunately, our VP’s situation once again confirms that the AMT in its current form is not in any way related to the original AMT enacted 40 years ago. It continues to hit “ordinary” Americans working hard for a living who just happen to be caught in its “sweet spot.” And that sweet spot continues to grow – currently over 4 million taxpayers and counting.
Why is Biden in the AMT but Obama is not? As we’ll see in future articles, he is making just enough income, and has just the wrong level of itemized deductions, and it is the interplay of these two that does it. The President, on the other hand, with his substantial book royalties, had nearly $3 million of income, at which level the “regular” tax is higher than the AMT.
Is there anything the VP can do about this? Of course there is – nearly everyone can reduce his/her AMT liability. In Biden’s case, his focus should be timing his deductions better. Especially with higher tax rates on the horizon – remember that rich people like him will soon be paying the promised higher taxes – the VP could save taxes by doing some simple planning. All this would take is a little modeling with a tax software program to see how tweaking his deductions could have a direct impact on his AMT.
The tax returns can be found on the White House web site – www.whitehouse.gov.
George Bauernfeind is with AMT Individual – providing information on alternative Minimum Tax Planning. He writes articles to help the tax payers to pay less Alternative Minimum Tax. He recommend to use Alternative Minimum Tax Calculator to reduce Alternative Minimum Tax.
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