Your Biggest Tax Break in 2013: General Electric Company (GE), E I Du Pont De Nemours And Co (DD), The Boeing Company (BA)

What the new law did
As a result of the new AMT law, however, there’ll be no more need for patches. The new law includes provisions that automatically raise the exemption every year to adjust for inflation. As a result, the AMT should only apply to roughly the same number of taxpayers that paid the tax in 2011, which was around 4 million taxpayers.

Of course, some complain that the entire structure of the AMT has been a failure. Although income is one factor in computing the tax, the AMT disproportionately hits taxpayers who live in places with high state and local income and property tax rates. The reason: state and local taxes are deductible under the regular tax system but aren’t deductible under the AMT. That makes middle-income taxpayers who live in those states more likely to get hit than those with similar incomes in low-tax areas.

Moreover, the AMT doesn’t always meet its original goal of getting rich individuals and corporations to pay taxes. Individuals can still use a variety of tactics, including investing in tax-free municipal bonds and tax-favored retirement accounts, to zero out their tax liability. On the corporate front, dozens of companies manage to pay no income tax, with a Citizens for Tax Justice study highlighting General Electric Company (NYSE:GE) for reaping more than $4.7 billion in federal tax refunds from 2008 to 2010 despite having profits of more than $10 billion over the period. Fellow Dow Industrials companies E I Du Pont De Nemours And Co (NYSE:DD) and The Boeing Company (NYSE:BA) also managed to boast negative effective tax rates, along with a host of utility companies. Too-big-to-fail bank Wells Fargo & Co (NYSE:WFC) made the list thanks to the tax losses it acquired in its purchase of Wachovia.

Living with a better AMT
Even with its flaws, the AMT isn’t likely to disappear soon. But tens of millions of taxpayers can rest easier thanks to the biggest tax break that the new 2013 legislation brought them.

The article Your Biggest Tax Break in 2013 originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger owns warrants on Wells Fargo. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of General Electric and Wells Fargo.

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