The Alternative Minimum Tax, (AMT), was once a recurring problem. Congress made a permanent fix to AMT in January 2013 and put the annual panic to rest. The permanent fix in 2013 was the 20th change over a forty year span. The AMT scare is over.
Over 50 years ago, it was reported that 150 taxpayers paid no income tax by taking advantage of special loopholes. AMT was invented by Congress and the Nixon Administration in the late 1960's. President Regan blended the AMT into the income tax in the early 1980's. No one ever indexed the computations to inflationary increases of income. Let's face it. People earn substantially higher incomes in 2014 than were earned in the 60's & 70's.
AMT seeks to assure that the extremely wealthy incur a minimum tax liability, regardless of any tax breaks and special treatments. The AMT is the basic floor that taxpayers are required to pay.
AMT evolved to create a whole separate set of tax laws. Except for charitable donations and mortgage interest, almost all other deductions and exemptions are eliminated. There is a whole set of different tax rates.
Incomes under $80,800 for joint filers and under $51,900 for single filers are totally exempt from AMT in 2013. Taxpayers with incomes over those levels must pay at least a flat tax rate. For taxpayers with incomes up to $179,500 the rate is at least 26% and 28% for income over that amount.
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