The Expanding Reach of the Alternative Minimum Tax

by Clark M. Blackman

Think back to an earlier time in your life when you were younger and probably poorer than you are now. The idea of the “rich” being able to get away with paying little or no taxes probably elevated your blood pressure every April 15 as you wrote your check to the IRS. The collective outrage of millions like you led to the creation of the alternative minimum tax (AMT) in 1978. The alternative minimum tax was created to keep the “Fat Cats” from using tax reduction strategies to reduce their taxes to next to nothing.

Flash forward to the year 2002. You are now making more money than you ever thought possible. Yet somehow, you are still far from what you would consider rich. Imagine your surprise when you learn that not only did you not get the big tax cut you expected, but you are now “rich” and are actually subject to the alternative minimum tax. Ostensibly created as a means of keeping the rich from living tax-free, the alternative minimum tax is casting an ever-widening net each year as more taxpayers become subject to it.

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This article will review the alternative minimum tax and explain the circumstances that expose an ever-larger number of taxpayers to this tax each year.

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