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Recovered money! Refundable minimum tax credit expanded


Taxpayers who paid an alternative minimum tax have been frustrated for years that they couldn’t use their minimum tax credits. Now a tax law has been enacted that will help them recover what was supposed to be a prepaid tax.

The new tax law, enacted as part of Federal bailout legislation signed by President Bush on Friday, October 3, is called the “Tax Extenders and Alternative Minimum Tax Relief Act of 2008”.

Michael Gray, who writes Michael Gray, CPA’s Option Alert said, "Wow! The refundable minimum tax credit has been significantly enhanced from the refundable credit first enacted effective for 2007. Starting in 2008, the percentage of minimum tax credits that are more than three years old that can be claimed as a refundable credit has increased from 20% to 50%. The phaseout for high income taxpayers that applied for 2007 has been eliminated starting 2008. The refundable minimum tax credit is still scheduled to expire after 2012.

In addition, 50% of penalties and interest paid before October 3, 2008 attributable to an alternative minimum tax for an exercise of an incentive stock option will be added to the refundable minimum tax credit each year for 2008 and 2009, a total of 100%!

“Some taxpayers who went through financial hardships to pay the alternative minimum tax and thought they had no hope of recovering it will be dancing in the streets!” said Mr. Gray.

Michael Gray’s CPA firm helps employees with tax planning for employee stock options. You can subscribe to his free newsletter and find articles, questions and answers relating to employee stock options at his web site,



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