Alternative Minimum Tax

About Alternative Minimum Tax

The Alternative Minimum Tax was enacted in 1969 after Treasury Secretary Joseph Barr revealed that 155 high income households paid no federal income tax. The AMT requires taxpayers to calculate their tax under two systems and pay the higher amount. The AMT disallows many deductions and preferences. Originally targeting the very wealthy, the AMT was not indexed for inflation and gradually affected more middle class families. By 2010, approximately 20 percent of households were projected to pay the AMT. The TCJA of 2017 significantly increased the AMT exemption and phase out thresholds, reducing the number of AMT taxpayers to approximately 0.1 percent. The AMT illustrates the problem of not indexing tax parameters for inflation, a lesson that was also relevant to the SALT cap and other TCJA provisions.