Tax Law 2013: Why a 51% Rate May Make You Feel Nostalgic for the AMT

This report sheds light on a little-noticed wrinkle triggered by possible new 2013 rate changes that will make some taxpayers no longer subject to the Alternative Minimum Tax (AMT). Wealthy taxpayers currently paying AMT may see their effective marginal rates rise by as much as 12.5 percentage points under the law now scheduled to go into effect in January 2013. Since such a large increase will automatically reduce the net return of tax-inefficient strategies like some hedge funds and active stock picking, investors will benefit from a thorough review of their current equity allocations to ensure that they have contingency after-tax asset allocation plans should rates rise.