What is the AMT?
The Alternative Minimum Tax is a flat income tax with two
brackets, 26% for individuals and 28% for married couples, that
does not allow certain deductions for dependents, medical expenses,
or state or local taxes. Taxpayers are obligated to pay the AMT if
it is higher than their regular tax rate. About five million people
paid the AMT last year.
What's the problem?
The AMT is not indexed to inflation, and as such, Congress has
passed yearly patches to the AMT to prevent millions of middle
income taxpayers from paying the tax. This year, however, Congress
has not passed legislation to adjust the AMT to inflation. The
inflation patch is expected to cost approximately $100 billion.
