Update: Tax Savings from Fiscal Stimulus
February 11, 2009
Last Friday, February 6, we released a Fiscal Fact (The Tax Savings from Fiscal Stimulus) and a blog post outlining the individual income tax provisions in both the House and Senate versions of the stimulus bill. Included was a table showing what two typical families would save in taxes under each version. This table has since been updated.
The table originally assumed that because the House bill does not include an AMT patch, taxpayers would not be allowed to use the American Opportunity credit to reduce tentative AMT liability (i.e. in the absence of an AMT patch, even if you are not required to pay AMT, there is a minimum level (tentative AMT) that your tax liability cannot be reduced below using credits such as the American Opportunity credit). The table showed that while House bill is slightly more generous in a few of its provisions, in most of the examples we looked at the Senate bill provided significantly more savings because the Senate bill currently includes an AMT patch.
It turns out that even though there is no AMT patch in the House bill, there is a provision allowing the American Opportunity credit to reduce AMT, and hence tentative AMT. The change affects middle income taxpayers the most (because their incomes are high enough to have tentative AMT but low enough that their credit has not phased out) and provides savings for these taxpayers that are closer to the Senate bill than originally indicated. The table has been edited to reflect this provision.