The Alternative Minimum Tax (AMT) is something most people know nothing about. AMT was created in 1982 to assure that high-income individuals didn’t escape paying federal taxes..
The issue is simple: the income level at which the AMT comes into effect wasn’t “indexed for inflation”, that is, it wasn’t designed to increase over time as wages and prices did naturally. The result? Someone who was considered “high-income” in 1982 is considered very middle-class today. That income amount for married taxpayers? $45,000.
Income for AMT is calculated differently than for normal income taxes, and the rates are sky high – 26-28%.
Unless Congress passes a law adjusting that income threshold by the end of the year, the Congressional Research Service estimates 30 million taxpayers will be hit by the AMT – many of them middle income, average people.
We’ll keep an eye on Congress and bring you the latest.
